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Item 9A. Controls and Procedures

2022-03-31 compared with 2021-03-31 · 1736 added, 1669 removed, 389 unchanged (90% of the section changed)

1 unchanged sentence

Evaluation of Disclosure and Control Procedures

maintain “disclosure controls and procedures”, as such terms are defined under Exchange Act Rule 13a-15(e), that are

designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and

reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated

to our management, including our Chief Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions

regarding required disclosures.

The Company acknowledges that any controls and procedures can provide only reasonable assurances

of achieving the desired control objectives.

have carried out an evaluation as required by Rule 13a-15(d) under the supervision of and with the participation of our management,

including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure

controls and procedure as of December 31, 2020.

Based upon their evaluation, the Chief Executive Officer and Principal Accounting

Officer concluded that, as of December 31, 2020, the Company’s disclosure controls and procedures were not effective.

we have determined that the existing controls and procedures are not effective, the deficiencies identified have not been deemed

material to our reporting disclosures.

Management’s Report on Internal Controls over Financial Reporting

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting,

as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting refers to the

process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected

by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

maintain “disclosure controls and procedures”, as such terms are defined under Exchange Act Rule 13a-15(e), that are designed

to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within

the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management,

including our Chief Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required

The Company acknowledges that any controls and procedures can provide only reasonable assurances of achieving the desired

control objectives.

have carried out an evaluation as required by Rule 13a-15(d) under the supervision of and with the participation of our management, including

our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls

and procedure as of December 31, 2021.

Based upon their evaluation, the Chief Executive Officer and Principal Accounting Officer concluded

that, as of December 31, 2021, the Company’s disclosure controls and procedures were not effective.

Although we have determined

that the existing controls and procedures are not effective, the deficiencies identified have not been deemed material to our reporting

Management’s Report on Internal Controls over Financial Reporting

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such

term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting refers to the process designed

by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board, management

and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with generally accepted accounting principles.

control over financial reporting cannot provide absolute assurance of achieving their objectives.

Internal control over financial

reporting is a process that involves human diligence and compliance and is subject to lapses in judgement and breakdowns resulting

from human failures.

Due to their inherent limitations, there is a risk that material misstatements may not be prevented or detected

on a timely basis by internal control over financial reporting.

It is possible to design safeguards to reduce, but not eliminate,

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the

has used the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee

of Sponsoring Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal

control over financial reporting.

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there

is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not

be prevented or detected on a timely basis.

Based on such evaluation, our CEO concluded that, as of December 31, 2020, our internal

controls over financial reporting were not effective.

a result of our evaluation, we identified a material weakness in our controls related to segregation of duties and other immaterial

weaknesses in several areas of data management and documentation.

management is composed of a small number of professionals resulting in a situation where limitations on segregation of duties

Accordingly, as a result of the material weakness identified above, we have concluded that the control deficiencies result

in a reasonable possibility that a material misstatement of the annual or interim financial statements may not be prevented on

a timely basis by the Company’s internal controls.

We continue to employ and refine a structure in which critical accounting

policies, issues and estimates are identified, and together with other complex areas, are subject to multiple reviews by executives.

In addition, we evaluate and assess our internal controls and procedures regarding our financial reporting, utilizing standards

incorporating applicable portions of the Public Company Accounting Oversight Board’s 2009 Guidance for Smaller Public Companies

in Auditing Internal Controls Over Financial Reporting as necessary on an on-going basis.

We have implemented a new ERP and

accounting software in 2020 that encompasses all our subsidiaries.

This software allows for a higher level of control,

better audit trail and improved segregation of duties and improves the Company’s overall compliance with

COSO but the deficiency is still present.

The hiring of additional staff is dependent upon our obtaining sufficient cash flows

from operations or financings.

the material weakness set forth above were the result of the scale of the Company’s operations and is intrinsic to its small

size, the Company believes the risk of material misstatements relative to financial reporting are minimal.

annual report does not include an attestation report of our registered public accounting firm regarding internal control over

Internal control over financial reporting

is a process that involves human diligence and compliance and is subject to lapses in judgement and breakdowns resulting from human failures.

Due to their inherent limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by

internal control over financial reporting.

It is possible to design safeguards to reduce, but not eliminate, this risk.

Management is

responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

has used the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal control over

financial reporting.

Management’s report was not subject to attestation by its registered public accounting firm pursuant

to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits the Company to provide only management’s

report in this annual report.

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented

or detected on a timely basis.

Based on such evaluation, our CEO concluded that, as of December 31, 2021, our internal controls over

financial reporting were not effective.

a result of our evaluation, we identified a material weakness in our controls related to segregation of duties and other immaterial weaknesses

in several areas of data management and documentation.

management is composed of a small number of professionals resulting in a situation where limitations on segregation of duties exist.

Accordingly, and as a result of the material weakness identified above, we have concluded that the control deficiencies result in a reasonable

possibility that a material misstatement of the annual or interim financial statements may not be prevented on a timely basis by the

Company’s internal controls.

We continue to employ and refine a structure in which critical accounting policies, issues and estimates

are identified, and together with other complex areas, are subject to multiple reviews by executives.

In addition, we evaluate and assess

our internal controls and procedures regarding our financial reporting, utilizing standards incorporating applicable portions of the

Public Company Accounting Oversight Board’s 2009 Guidance for Smaller Public Companies in Auditing Internal Controls Over Financial

Reporting as necessary on an on-going basis.

at the end of 2021, the Company engaged a professional consulting firm to help with implementing an internal process in accordance with

section 404a of the Sarbanes-Oxley Act 2000 (SOX).

The Company is in the process of implementing the SOX process, and is currently performing

the documentation phase.

The controls in the main business processes that refer to the preparation of financial statement reporting of

the main Company were documented, gaps were noted, and a remediation plan was prepared.

The Company is in the process of implementing

the remediation plan in order for these controls to be found effective in the test phase.

The Company plans on completing the documentation

phase in it’s other subsidiaries that are switching to our ERP system.

the material weakness set forth above were the result of the scale of the Company’s operations and is intrinsic to its small size,

the Company believes the risk of material misstatements relative to financial reporting are minimal.

annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial

Management’s report was not subject to attestation by its registered public accounting firm pursuant to the Dodd-Frank

Wall Street Reform and Consumer Protection Act, which permits the Company to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange

Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect,

our internal control over financial reporting.

were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,

during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal

control over financial reporting.

OTHER INFORMATION

3 unchanged sentences

of our officers and directors

following is a brief account of the education and business experience during at least the past five years of our officers and

directors, indicating each person’s principal occupation during that period, and the name and principal business of the

organization in which such occupation and employment were carried out.

Lustgarten, was appointed the Company’s CEO in April 2017 and served as the Company’s interim CFO from December

following is a brief account of the education and business experience during at least the past five years of our officers and directors,

indicating each person’s principal occupation during that period, and the name and principal business of the organization in which

such occupation and employment were carried out.

Lustgarten, was appointed the Company’s CEO in April 2017 and served as the Company’s interim CFO from December 2018

through September 4, 2019.

1 unchanged sentence

beginning June 2016.

Teamtronics manufactures rugged computers and electronic equipment mainly used in the Gas and oil industry.

From 2014 to 2017,

Lustgarten was the Chief Executive Officer at Micronet Limited Inc., a developer and manufacturer of mobile computing platforms

for integration into fleet management and mobile workforce solutions listed on the Tel Aviv Stock Exchange.

From 2013 to 2014,

Lustgarten served as EVP Business Development and Head of the Aerospace and defense Division of Micronet EnertecTechnologies,

a technology company listed on the NASDAQ Capital Market.

manufactures rugged computers and electronic equipment mainly used in the Gas and oil industry.

From 2014 to 2017, Mr.

Lustgarten was VP of Sales, Marketing and CMO

of TAT Technologies, a world leading supplier of electronic systems to the commercial and defense markets, from.

His prior experience

also includes serving as CEO of T.C.E.

Aviation Ltd.

in Belgium and serving from 1993 to 1997 as the assistant to the Military

Attaché

at the Embassy of Israel in Washington, DC.

He received his Bachelor of Science degree in Business Management

& Computer Science from the University of Maryland.

Lustgarten was

the Chief Executive Officer at Micronet Limited Inc., a developer and manufacturer of mobile computing platforms for integration into

fleet management and mobile workforce solutions listed on the Tel Aviv Stock Exchange.

From 2013 to 2014, Mr.

Lustgarten served as EVP

Business Development and Head of the Aerospace and defense Division of Micronet EnertecTechnologies, a technology company listed on the

NASDAQ Capital Market.

From 2009 to 2013 Mr.

Lustgarten was VP of Sales, Marketing and CMO of TAT Technologies, a world leading supplier

of electronic systems to the commercial and defense markets, from.

His prior experience also includes serving as CEO of T.C.E.

in Belgium and serving from 1993 to 1997 as the assistant to the Military Attaché at the Embassy of Israel in Washington,

He received his Bachelor of Science degree in Business Management & Computer Science from the University of Maryland.

Nissenson became a director of the Company in April 2017 and was appointed as our CFO on September 5, 2019, effective October 10,

He is an experienced entrepreneur and financial officer.

Nissenson founded Hotwine, Inc., a California

based wine startup company.

Nissenson founded Hotwine, Inc., a California based wine

startup company.

Since August 2016 and until October 10, 2019, Mr.

Nissenson served as the Chief Financial Officer

of Hypnocore, Ltd., an Israeli based startup company that develops mobile applications for sleep monitoring and therapy.

2011 to 2015, Mr.

Nissenson was the Chief Financial Officer of GMW, Inc., a high-end wine retailer from Napa, California.

Nissenson served as the Vice President from 2006 to 2011 and the Chief Financial Officer from 2009 to 2011 at Phoenix

International Ventures, Inc., an aerospace defense company.

Nissenson was also a member of the Municipal Committee for Business

from 2004 to 2007 and a member of Municipal Committee for Street Naming from 2005 to 2007 in the City of Herzliya, Israel.

is also an armored platoon commander in the Israeli Defense Forces (Reserve) Armored Corps with a rank of Captain.

graduated from Tel Aviv University in 2005 with a B.A.

majoring in General History and Political Science.

In 2007, he graduated

from the Hebrew University with an Executive Master’s degree in Business Administration specializing in Integrative Management.

Nissenson served as the Chief Financial Officer of Hypnocore, Ltd.,

an Israeli based startup company that develops mobile applications for sleep monitoring and therapy.

From 2011 to 2015, Mr.

was the Chief Financial Officer of GMW, Inc., a high-end wine retailer from Napa, California.

Before that, Mr.

Nissenson served as the

Vice President from 2006 to 2011 and the Chief Financial Officer from 2009 to 2011 at Phoenix International Ventures, Inc., an aerospace

defense company.

Nissenson was also a member of the Municipal Committee for Business from 2004 to 2007 and a member of Municipal

Committee for Street Naming from 2005 to 2007 in the City of Herzliya, Israel.

He is also an armored platoon commander in the Israeli

Defense Forces (Reserve) Armored Corps with a rank of Captain.

Nissenson graduated from Tel Aviv University in 2005 with a B.A.

in General History and Political Science.

In 2007, he graduated from the Hebrew University with an Executive Master’s degree in

Business Administration specializing in Integrative Management.

MacMillan became a director of the Company in April 2017.

He is a corporate communications professional with 20 years of

corporate communications experience in the global securities industry, plus 18 years of direct investment banking and related

He was a director of NTS, Inc.

since December 20, 2012 and since December 27, 2012 served as the Chairman of its Nominating

and Corporate Governance Committee until NTS’

sale to a private equity firm in June 2014.

He is a corporate communications professional with 20 years of corporate

communications experience in the global securities industry, plus 18 years of direct investment banking and related experience.

a director of NTS, Inc.

since December 20, 2012 and since December 27, 2012 served as the Chairman of its Nominating and Corporate Governance

Committee until NTS’ sale to a private equity firm in June 2014.

Since 2010, Mr.

MacMillan has

served as an independent management consultant providing marketing and communications advisory to clients.

Prior to that from

2007 until 2010, Mr.

MacMillan served as Director, Global Communications & Marketing of AXA Rosenberg, a leading equity asset

management firm.

MacMillan has served as an independent management

consultant providing marketing and communications advisory to clients.

Prior to that from 2007 until 2010, Mr.

MacMillan served as Director,

Global Communications & Marketing of AXA Rosenberg, a leading equity asset management firm.

Prior to that, Mr.

MacMillan served in a variety of corporate communication roles including Senior Vice President

of Corporate Communications & Government Affairs at Ameriprise Financial, Head of Corporate Communications (Americas) at Barclays

Capital, Senior Vice President of Corporate Communications of The NASDAQ Stock Market and Director of Corporate Communications

at Credit Suisse First Boston.

MacMillan previously served as an investment banker, acquisition officer, and consultant directly

involved with capital raising, acquisitions, and financial feasibility studies.

MacMillan holds a BS in Industrial Engineering

from the University of Iowa and a Masters in Business Administration from Harvard.

MacMillan served in

a variety of corporate communication roles including Senior Vice President of Corporate Communications & Government Affairs at Ameriprise

Financial, Head of Corporate Communications (Americas) at Barclays Capital, Senior Vice President of Corporate Communications of The

NASDAQ Stock Market and Director of Corporate Communications at Credit Suisse First Boston.

MacMillan previously served as an investment

banker, acquisition officer, and consultant directly involved with capital raising, acquisitions, and financial feasibility studies.

MacMillan holds a BS in Industrial Engineering from the University of Iowa and a Masters in Business Administration from Harvard.

Shalem became a director of the Company in April 2017.

He has extensive experience in financial and business management.

Shalem has served as the Chief Financial Officer at Saga Foundation since January 2018.

has served as the Chief Financial Officer at Saga Monetary Technologies Limited (UK) since January 2018.

Prior to that Mr.

Shalem served as the

Chief Financial Officer at Singulariteam VC since January 2014 till January 2018.

He also worked as the Chief Financial Officer

at Mobli Media Inc.

served as the Chief Financial Officer at Singulariteam VC from January 2014 till January 2018.

He also worked as the Chief Financial

Officer at Mobli Media Inc.

from January 2014 to December 2016.

Shalem’s experience also includes serving as the Chief Financial

Officer of TAT Technologies Ltd., a NASDAQ listing company, from April 2008 to December 2013.

Shalem is a CPA in Israel.

received his B.A.

in Economy & Accounting from Tel Aviv University in 1999 and an MBA degree from Bar-Ilan University 2004.

in Economy & Accounting from Tel Aviv University in 1999 and an MBA degree from Bar-Ilan University in 2004.

Elhanani, age 47, is a qualified CFO with experience leading financial strategies to facilitate a company’s growth plans.

has been the CFO and a partner of Singulariteam VC, a venture capital firm, since 2017.

Elhananai has been the CFO of Sirin Labs

Sirin Labs is a multinational, high-tech company specializing in secured mobile phones.

From 2015 to 2017, Mr.

the CFO of SalesTech, an online internet technology servicing company.

Elhanani has also served as the CFO of other companies, including:

Micronet Ltd.

InterLogic Ltd.

and Finotec Group Inc.

From 2003 to 2006, Mr.

Elhanani was the corporate

controller of On Track Innovations Ltd.

From 1999 to 2003, Mr.

Elhanani was a senior auditor at Kesselman and Kesselman (PWC Israel).

Elhanani was a lecturer at IVC College in Israel from 2014 to 2018 and at Hebrew University in Jerusalem from 2001 to 2003.

has also served as a board member for various companies, including:

General Robotics (2017-Present);

Effective Space Solutions (2017-Present);

Octopus Systems (2017-Present);

and Infinity AR (2017-2019).

Elhanani received a B.A.

in Accounting and Economics, and a Master of

Business Administration, specializing in finance, from Hebrew University.

Almog, age 83, has served in various management positions and board roles over the years.

From May 2006 to March 2014, Mr.

as an independent director and the chairman of the audit committee of NTS, Inc., an advanced communication company based in the United

From 2002 to 2006, Mr.

Almog was the executive vice president of engineering of Comverge Inc., a company based in Atlanta, Georgia,

which offers solutions to electric utilities.

From 1993 to 2002, Mr.

Almog served as the president and CEO of Comverge Control Systems

Ltd., an Israel based startup company which develops innovative solutions for electric utilities.

From 1995 to 1998, Mr.

independent director of Rada Company, a high tech Israeli based company specializing in advanced systems for commercial and military

From 1990 to 1993, Mr.

Almog was the president and CEO of Tasco Electronic Services, Inc., a U.S.

based company specializing

in automatic test machines for commercial and military aviation.

Prior to that, Mr.

Almog served in the Israeli Navy for 32 years reaching

the position of Rear Admiral.

Almog received a B.A.

in Modern Middle East History, and a Master of Business Administration from the

Tel Aviv University.

EXECUTIVE COMPENSATION

table below shows the compensation for services in all capacities we paid during the year ended December 31, 2021 to the individuals

serving as our principal executive officers during the last completed fiscal year and our other two most highly paid executive

officers at the end of the last completed fiscal year (whom we refer to collectively as our “named executive officers”);

Name and Principal Position

serving as our principal executive officers during the last completed fiscal year and our other two most highly paid executive officers

at the end of the last completed fiscal year (whom we refer to collectively as our “named executive officers”);

Principal Position

Shai Lustgarten

2 unchanged sentences

Chief Financial Officer

fair market value of the options awarded to Mr.

Lustgarten for 2020 is $1.1 million.

Nissenson was appointed as the Company’s Chief Financial Officer in September 2019, effective October 10, 2019.

bonuses granted in the future will relate to meeting certain performance criteria that are directly related to areas within the

named executive’s responsibilities with the Company.

As we continue to grow, more defined bonus programs may be established

to attract and retain our employees at all levels.

bonuses granted in the future will relate to meeting certain performance criteria that are directly related to areas within the named

executive’s responsibilities with the Company.

As we continue to grow, more defined bonus programs may be established to attract

and retain our employees at all levels.

February 2020, we entered into an employment agreement with Mr.

Lustgarten, the Company’s Chief Executive Officer, (the

“Lustgarten Agreement”) pursuant to which Mr.

Lustgarten shall continue to serve as the Company’s Chief Executive

The Lustgarten Agreement has a four (4) year term and automatically renews for additional one (1) year periods unless

either party elects to terminate the Lustgarten Agreement.

Pursuant to the Lustgarten Agreement, the Company shall pay Mr.

an annual base salary of $560,000.

Lustgarten shall also be eligible to receive i) equity awards pursuant to the Company’s

2018 Equity Incentive Plan and the 2020 Equity Incentive Plan and ii) certain milestone bonuses as set forth in

Lustgarten, the Company’s Chief Executive Officer, (the “Lustgarten

Agreement”) pursuant to which Mr.

Lustgarten shall continue to serve as the Company’s Chief Executive Officer.

The Lustgarten

Agreement has a four (4) year term and automatically renews for additional one (1) year periods unless either party elects to terminate

the Lustgarten Agreement.

Pursuant to the Lustgarten Agreement, the Company shall pay Mr.

Lustgarten an annual base salary of $560,000.

Lustgarten shall also be eligible to receive i) equity awards pursuant to the Company’s 2018 Equity Incentive Plan and the

2020 Equity Incentive Plan and ii) certain milestone bonuses as set forth in the Lustgarten Agreement.

In the event Mr.

Lustgarten’s employment is terminated by Mr.

Lustgarten for good reason, or terminated

by the Company without cause, Mr.

Lustgarten shall be entitled to the greater of (i) the unpaid base salary or (ii) one (1) year’s

September 2019, the Company and HTS Image Ltd., a wholly owned subsidiary, entered into an employment agreement with Mr.

Neev Nissenson to serve as the Chief Financial Officer of each the Company and HTS Image Ltd., effective October 10, 2019, pursuant

to which the Company shall pay Mr.

Neev Nissenson a monthly base salary of NIS (New Israeli Shekels) 44 thousand.

is eligible to earn certain bonuses upon the Company’s achievement of certain performance milestones as set forth in his

employment agreement.

Nissenson’s employment agreement has an initial term of two (2) years and shall automatically

renew for one (1) year periods.

As consideration and pursuant to the Company’s 2018 Equity Incentive Plan, the Company issued

Nissenson an option to purchase 35,000 shares of the Company’s common stock at an exercise price of $5.00 per share.

Nissenson is eligible to receive equity awards pursuant to the 2020 Equity Incentive Plan.

employment is terminated by Mr.

Lustgarten for good reason, or terminated by the Company without cause, Mr.

Lustgarten shall be entitled

to the greater of (i) the unpaid base salary or (ii) one (1) year’s base salary.

the sole discretion of our Board, all officers are entitled to merit-based cash and equity bonuses.

Fees Earned or Paid in Cash

Option(1) Awards

Non-Equity Incentive Plan

Nonqualified Deferred Compensation

All Other Compensation

Neev Nissenson (1)

Earned or Paid in Cash ($)

Incentive Plan Compensation

Deferred Compensation

Other Compensation

Andrew MacMillan

1 unchanged sentence

fair value of the options awarded to Mr.

Nissenson, Mr.

MacMillan and Mr.

Shalem in 2020 and 2019 was determined to be $100

thousand and $266 thousand, respectively using the Black-Scholes Option Pricing Model, which uses certain assumptions related

to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends

Shalem in 2020 was determined to be $100 thousand, respectively

using the Black-Scholes Option Pricing Model, which uses certain assumptions related to risk-free interest rates, expected volatility,

expected life of the stock options or warrants, and future dividends

PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

employment agreements for our named executive officers generally provide that in the event of termination of such executive’s

employment for any reason, or if the executive resigns, the Company is required pay certain separation benefits, including (i)

unpaid annual salary earned through the termination date;

employment agreements for our named executive officers generally provide that in the event of termination of such executive’s employment

for any reason, or if the executive resigns, the Company is required pay certain separation benefits, including (i) unpaid annual salary

earned through the termination date;

(ii) unused vacation;

(iii) accrued and unpaid expenses;

and (iv) other

vested and accrued benefits to which he is entitled under the Company’s employee benefit plan.

In the event the executive

voluntarily resigns for “good reason”

(as defined in each executive’s respective Employment Agreement) or the

Company terminates their employment for any reason other than for cause (as defined in each executive’s respective Employment

Agreement), the Company will be required to pay certain termination benefits, including (i) a lump sum payment equal to the greater

of (A) unpaid annual salary through the end of the Initial Term or Renewal Term (as those terms are defined in each executive’s

respective Employment Agreement) or (B) two years of annual salary and (ii) COBRA reimbursement.

and (iv) other vested and accrued benefits

to which he is entitled under the Company’s employee benefit plan.

In the event the executive voluntarily resigns for “good

reason” (as defined in each executive’s respective Employment Agreement) or the Company terminates their employment for any

reason other than for cause (as defined in each executive’s respective Employment Agreement), the Company will be required to pay

certain termination benefits, including (i) a lump sum payment equal to the greater of (A) unpaid annual salary through the end of the

Initial Term or Renewal Term (as those terms are defined in each executive’s respective Employment Agreement) or (B) two years

of annual salary and (ii) COBRA reimbursement.

Leadership Structure and Risk Oversight

Board currently consists of four members, Mr.

Our Board currently consists of six members,Mr.

Shai Lustgarten, Mr.

1 unchanged sentence

MacMillan and Mr.

Lustgarten also serves as our Chief Executive Officer and Mr.

Neev Nissenson serves as our Chief Financial Officer.

Yaron Shalem, Mr.

Guy Elhanani and Mr.

Itzhak Almog.

of the key functions of our Board is to provide oversight of our risk management process.

Our Board administers this oversight

function directly, with support from its three standing committees—the Audit Committee, the Compensation Committee, and

the Corporate Governance/Nominating Committee.

to Item 407(a)(1)(ii) of Regulation S-K promulgated under the Securities Act, we have adopted the definition of “independent

director”

Our Board administers this oversight function

directly, with support from its three standing committees—the Audit Committee, the Compensation Committee, and the Corporate Governance/Nominating

to Item 407(a)(1)(ii) of Regulation S-K promulgated under the Securities Act, we have adopted the definition of “independent director”

as set forth in Rules 5000(a)(19) and 5605(a)(2) of the rules of the Nasdaq Stock Market.

The Board determined

MacMillan and Mr.

Yaron Shalem qualify as “independent directors”

pursuant to such rules.

The Board determined that Mr.

Yaron Shalem, Mr.

Guy Elhanani and Mr.

Itzhak Almog qualify as “independent directors” pursuant to such rules.

Board of Directors met 4 times during 2021.

Each member of our Board of Directors attended 100% of the total number of

meetings of our Board and its committees on which he served during 2020.

Each member of our Board of Directors attended 100% of the total number of meetings

of our Board and its committees on which he served during 2021 .

have three standing committees:

the Audit Committee, the Compensation Committee, and the Corporate Governance/Nominating Committee.

We believe that the members of the Audit Committee, Compensation Committee and Corporate Governance/Nominating Committee are deemed

to be “independent”

pursuant to the NASDAQ listing standards and applicable SEC rules.

We believe that all members

of our Board have been and remain qualified to serve on the committees of our Board and have the experience and knowledge to perform

the duties required of the committees.

We believe that the members of the Audit Committee, Compensation Committee and Corporate Governance/Nominating Committee are deemed to

be “independent” pursuant to the NASDAQ listing standards and applicable SEC rules.

We believe that all members of our Board

have been and remain qualified to serve on the committees of our Board and have the experience and knowledge to perform the duties required

of the committees.

Audit Committee consists of Mr.

3 unchanged sentences

Our Board has determined

Shalem qualifies as an “audit committee financial expert,”

as defined under the rules of the SEC.

primary responsibility of the Audit Committee is to oversee our financial reporting process on behalf of the Board and report

the results of their activities to the Board.

The Audit Committee’s responsibilities include providing assistance to the

Board in fulfilling the Board’s oversight responsibility relating to:

integrity of the Company’s financial statements and the related public reports,

Shalem qualifies as an “audit committee financial expert,” as defined under the rules of the SEC.

primary responsibility of the Audit Committee is to oversee our financial reporting process on behalf of the Board and report the results

of their activities to the Board.

The Audit Committee’s responsibilities include providing assistance to the Board in fulfilling

the Board’s oversight responsibility relating to:

integrity of the Company’s financial statements and the related public reports,

and regulatory filings in which they appear;

systems of internal control over financial reporting, operations, and legal/regulatory compliance;

performance, qualifications and independence of the Company’s independent accountants;

performance, qualifications and independence of the Company’s internal audit function, and

with the Company’s ethics policies and applicable legal and regulatory requirements.

Audit Committee charter is available on the “About”

subpage of our website (www.omniq.com) under the link “Corporate

Governance”.

performance, qualifications and independence of the Company’s independent accountants;

performance, qualifications and independence of the Company’s internal audit function, and

with the Company’s ethics policies and applicable legal and regulatory requirements.

Audit Committee charter is available on the “About” subpage of our website (www.omniq.com) under the link “Corporate

Compensation Committee consists of Mr.

MacMillan, Mr.

Shai Lustgarten and Mr.

MacMillan, and Mr.

Yaron Shalem.

MacMillan serves as

Compensation Committee’s responsibilities include, among others:

annually the corporate goals and objectives applicable to the compensation of the Chief Executive Officer and/or President,

evaluate at least annually the Chief Executive Officer’s and/or President’s performance in light of those goals

and objectives, and determine and approve the Chief Executive Officer’s and/or President’s compensation level

based on this evaluation;

MacMillan serves as Chairperson

Compensation Committee’s responsibilities include, among others:

annually the corporate goals and objectives applicable to the compensation of the Chief Executive Officer and/or President, evaluate

at least annually the Chief Executive Officer’s and/or President’s performance in light of those goals and objectives,

and determine and approve the Chief Executive Officer’s and/or President’s compensation level based on this evaluation;

matters relating to executive succession and management development;

evaluate, and approve compensation for the Company’s officers;

evaluate, and approve cash incentives and deferred compensation plans for executives;

approve, and administer and, when appropriate, recommend to the Board for approval, incentive compensation plans and equity-based

employment contracts, severance agreements, change in control provisions, and other compensatory arrangements with Company

employment contracts, severance agreements, change in control provisions, and other compensatory arrangements with Company executives.

Compensation Committee has the authority, in its sole discretion, to select, retain, and obtain the advice of a compensation consultant

as necessary to assist with the execution of its duties and responsibilities.

Compensation Committee charter is available on the “About”

subpage of our website (www.omniq.com) under the link “Corporate

Governance”.

Compensation Committee charter is available on the “About” subpage of our website (www.omniq.com) under the link “Corporate

Governance/Nominating Committee

Corporate Governance/Nominating Committee consists of Andrew J.

MacMillan, Yaron Shalem and Shai S.

Lustgarten, whereby Shai Lustgarten

is the Chairman.

Corporate Governance/Nominating Committee’s responsibilities include, among others:

and oversee the Company’s corporate governance practices and procedures, including identifying best practices and reviewing

and recommending to the Board for approval any changes to the documents, policies and procedures in the Company’s corporate

governance framework;

procedures for the director nomination and to determine the qualifications, qualities, skills, and other expertise required

to be a director and to develop, and recommend to the Board for its approval, criteria to be considered in selecting nominees

for director;

and screen individuals qualified to become members of the Board, consistent with the above criteria, considering any director

candidates recommended by the Company’s stockholders;

a process for an annual evaluation of the Company’s Chief Executive Officer and/or President;

The Corporate Governance/Nominating Committee consists

MacMillan, and Yaron Shalem.

MacMillan is the Chairman.

Corporate Governance/Nominating Committee’s responsibilities include, among others:

and oversee the Company’s corporate governance practices and procedures, including identifying best practices, reviewing, and

recommending to the Board for approval any changes to the documents, policies, and procedures in the Company’s corporate governance

procedures for the director nomination and to determine the qualifications, qualities, skills, and other expertise required to be

a director and to develop, and recommend to the Board for its approval, criteria to be considered in selecting nominees for director;

and screen individuals qualified to become members of the Board, consistent with the above criteria, considering any director candidates

recommended by the Company’s stockholders;

a process for an annual evaluation of the Company’s Chief Executive Officer and/or President;

and oversee a process for an annual evaluation of the Board and its committees, including a formal assessment of each individual

Corporate Governance/Nominating Committee charter is available on the “About”

subpage of our website (www.omniq.com)

under the link “Corporate Governance”.

Corporate Governance/Nominating Committee charter is available on the “About” subpage of our website (www.omniq.com) under

the link “Corporate Governance”.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

following table sets forth certain information regarding beneficial ownership of our Common Stock as of December 31, 2021:

by each of our directors;

of our directors;

(ii) by each of our executive officers;

(iii) by our executive officers and directors as a group, and

(iv) by each person or entity known by us to beneficially own 5% or more of any class of our common stock.

As of December 31,

2020, there were 4,684,736 shares of our common stock outstanding.

Name and Address of Beneficial Owner

(iii) by our executive officers and directors as a group, and (iv) by each

person or entity known by us to beneficially own 5% or more of any class of our common stock.

As of December 31, 2021, there were 7,459,534

shares of our common stock outstanding.

and Address of Beneficial Owner

of Beneficial

Shai Lustgarten (Chairman and CEO) (1)

Andrew MacMillan (2)

Yaron Shalem (2)

Neev Nissenson (CFO) (5)

All Executive Officers and Directors as a group (4 individuals)

David Marin (3)

Carlos Nissenson (4)

Lustgarten (Chairman and CEO) (1)

MacMillan (2)

Nissenson (CFO) (5)

Executive Officers and Directors as a group (4 individuals)

Nissenson (4)

484,050 shares issuable upon the exercise of options.

Also includes (i) 746,808 shares and (ii) 33,333 shares issuable upon

the exercise of warrants held by Walefar Investments Ltd., which is beneficially owned by Mr.

shares issuable upon exercise of options.

Also includes (i) 746,808 shares and (ii) 33,333 shares issuable upon the exercise

of warrants held by Walefar Investments Ltd., which is beneficially owned by Mr.

52,500 shares issuable upon the exercise of options.

Also includes (i) 18,996 shares

127,125 shares issuable upon the conversion of preferred stock and the exercise of warrants.

The address of the shareholder

is 12272 Monarch Street, Garden Grove, CA 92841.

The address of the shareholder is 12272

Monarch Street, Garden Grove, CA 92841.

address of the shareholder is Vasili Michailidi 9, 3206 Limassol, Cyprus.

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Ltd., which is beneficially owned by Mr.

Also includes 158,333 shares underlying warrants.

Includes 130,000 shares issuable upon exercise of options.

Also includes (i) 57,026 shares.

Also includes 183,333 shares underlying

option and warrants.

105,000 shares issuable upon exercise of options.

Also includes (i) 27,289 shares

52,500 shares issuable upon the exercise of options.

Also includes (i) 19,025 shares

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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Nissensohn and/or an entity under his control, a consultant

to the Company and principal stockholder, (the “Nissensohn Agreement”) pursuant to Mr.

Nissensohn and/or

an entity under his control will provide certain consulting services to the Company.

The Nissensohn Agreement has a four (4) year

term and automatically renews for additional one (1) year periods unless either party elects to terminate the Nissensohn Agreement.

Pursuant to the Nissensohn Agreement, we will pay Mr.

to the Company and principal stockholder, (the “Nissensohn Agreement”) pursuant to Mr.

Nissensohn and/or an entity

under his control will provide certain consulting services to the Company.

The Nissensohn Agreement has a four (4) year term and automatically

renews for additional one (1) year periods unless either party elects to terminate the Nissensohn Agreement.

Pursuant to the Nissensohn

Agreement, we will pay Mr.

Nissensohn a monthly fee of $30,000.

Nissensohn shall also be eligible

to receive certain milestone bonuses as set forth in the Nissensohn Agreement.

Nissensohn is a principal stockholder of the

Nissensohn is the father of Neev Nissenson, our CFO and board member.

September 2019, the Company entered into a letter agreement with Mr.

Nissensohn and/or an entity under his control,

a consultant to the Company and principal stockholder, (the “Nissensohn Agreement”) pursuant to which they agreed

to extend the term of Mr.

Nissensohn’s and/or an entity under his control’s consulting agreement, for an additional

two (2) years.

As consideration and in light of Mr.

Nissensohn’s and/or an entity under his control’s past consulting

services which the Company believes were essential to its achievements, the Company, pursuant to its 2018 Equity Incentive Plan,

issued to Mr.

Nissensohn and/or an entity under his control 27,500 shares of the Company’s common stock.

conflicts of interest may exist between the Company and its management, and conflicts may develop in the future.

The Company has

not established policies or procedures for the resolution of current or potential conflicts of interest between the Company, its

officers and directors or affiliated entities.

There can be no assurance that management will resolve all conflicts of interest

in favor of the Company, and conflicts of interest may arise that can be resolved only through the exercise by management their

best judgment as may be consistent with their fiduciary duties.

Management will try to resolve conflicts to the best advantage

of all concerned.

Nissensohn shall also be eligible to receive certain milestone bonuses

as set forth in the Nissensohn Agreement.

Nissensohn is a principal stockholder of the Company.

Nissensohn is the father

of Neev Nissenson, our CFO and board member.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Board is directly responsible for the appointment, compensation, and oversight of our independent auditor.

It is the policy of

our Board to pre-approve all audit and non-audit services provided by our independent registered public accountants.

2019, RBSM LLP (“RBSM”) notified the Company of its resignation, effective immediately, as the Company’s independent

registered public accounting firm.

RBSM served as the auditors of the Company’s financial statements for the period from

the Company’s fiscal year end December 31, 2014 through the date of dismissal.

On June 6, 2019, the Company entered into

an engagement agreement with Haynie & Company to provide audit services for the year ending December 31, 2019.

Our Board has

considered whether the provision by Haynie & Company of services of the varieties described below is compatible with maintaining

the independence of Haynie & Company.

Our Board believes that Haynie & Company only provided audit services.

We use another

firm to provide tax compliance services.

fees shown in the table under the 2019 column reflect fees billed to us by RBSM and Haynie & Company while the 2020

column reflects fees billed by multiple firms.

Fiscal Year Ended

Audit related fees

All other fees

the above table, in accordance with the SEC’s definitions and rules, “audit fees”

are fees for professional

services for the audit of a company’s financial statements included in the annual report on Form 10-K, for the review of

a company’s financial statements included in the quarterly reports on Form 10-Q, and for services that are normally provided

by the accountant in connection with statutory and regulatory filings or engagements;

“audit-related fees”

for assurance and related services that are reasonably related to the performance of the audit or review of a company’s

financial statements;

“tax fees”

are fees for tax compliance, tax advice, and tax planning;

and “all other fees”

are fees for any services not included in the first three categories.

Aggregate fees billed or incurred related to the following years for

professional services rendered by Haynie & Company for 2021 and 2020 were $182 thousand and $181 thousand respectively.

the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees for professional services

for the audit of a company’s financial statements included in the annual report on Form 10-K, for the review of a company’s

financial statements included in the quarterly reports on Form 10-Q, and for services that are normally provided by the accountant in

connection with statutory and regulatory filings or engagements;

“audit-related fees” are fees for assurance and related

services that are reasonably related to the performance of the audit or review of a company’s financial statements;

fees” are fees for tax compliance, tax advice, and tax planning;

and “all other fees” are fees for any services not

included in the first three categories.

policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants.

These services

may include audit services, audit-related services, tax services and other services.

Under our Audit Committee’s policy,

pre-approval is generally provided for particular services or categories of services, including planned services, project-based

services and routine consultations.

In addition, the Audit Committee may also pre-approve particular services on a case-by-case

Our Audit Committee approved all services that our independent accountants provided to us in the past two fiscal years.

These services may include

audit services, audit-related services, tax services and other services.

Under our Audit Committee’s policy, pre-approval is generally

provided for particular services or categories of services, including planned services, project-based services and routine consultations.

In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis.

Our Audit Committee approved all services

that our independent accountants provided to us in the past two fiscal years.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed under pages F-1 through F-26 and are included as part of this Form 10-K:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENT OF STOCKHOLDERS’

EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BALANCE SHEETS

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

STATEMENTS OF EQUITY (DEFICIT)

STATEMENTS OF CASH FLOWS

TO CONSOLIDATED FINANCIAL STATEMENTS

Financial statement schedules are omitted as they are not applicable.

Exhibits required by Item 601 of Regulation S-K are incorporated herein by reference and are listed on the attached Exhibit Index,

which begins immediately following the financial statements of this Annual Report on Form 10-K.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibits required by Item 601 of Regulation S-K are incorporated herein by reference and are listed on the attached Exhibit Index, which

begins immediately following the financial statements of this Annual Report on Form 10-K.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

March 31, 2022

1 unchanged sentence

Executive Officer and Chairman of the Board

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Shai Lustgarten

2 unchanged sentences

Chief Financial Officer

/s/ Itzhak Almog

March 31, 2022

/s/ Guy Elhananai

March 31, 2022

TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENT OF STOCKHOLDERS’

EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PCAOB:

BALANCE SHEETS

STATEMENTS OF OPERATIONS

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

STATEMENTS OF CASH FLOWS

TO CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

Stockholders of OMNIQ Corp

of OMNIQ Corp

on the Financial Statements

have audited the accompanying consolidated balance sheets of OMNIQ Corp.

and Subsidiaries (the Company) as of December

31, 2020 and 2019, and the related consolidated statements of operations, stockholders’

equity (deficit), and cash

flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively

referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows

for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles

generally accepted in the United States of America.

Consideration

of the Company’s Ability to Continue as a Going Concern

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

As discussed in Note

3 to the financial statements, the Company has a deficit in stockholders’

equity, and has sustained recurring losses

from operations.

This raises substantial doubt about the Company’s ability to continue as a going concern.

Management’s

plans with regard to these matters are also described in Note 3.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

have audited the accompanying balance sheets of OMNIQ Corp.

and Subsidiaries (the Company) as of December 31, 2021 and 2020, and the

related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for each

of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021, and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December

31, 2021, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to

error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting,

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial

We believe that our audits provide a reasonable basis for our opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

Refer to Note 2 to the consolidated financial statements

Company has goodwill of $14.7 million as of December 30, 2020.

The Company evaluates its goodwill at least annually or more frequently

when events or changes in circumstances indicate the carrying value may not be recoverable.

The Company performed a goodwill analysis

by calculating the fair value of its operating segment using both an income and market approach and comparing it to the carrying

amount of its goodwill.

The income approach employed a discounted cash flow using a forecast developed by management.

approach used information from comparable companies to calculate a value using multiples of revenue and earnings before interest,

taxes, depreciation, and amortization.

These valuation methods require management to make significant estimates and assumptions

related to projected cash flows.

No impairment was recorded by the Company for the year ended December 31, 2020

identified goodwill as a critical audit matter because of the significant estimates and assumptions made by management to estimate

fair value, including the impact of forecasted growth, and the difference between the fair values and the carrying values as of

December 31, 2020.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve

our fair value specialist, when performing audit procedures to evaluate the reasonableness of management’s estimates and

assumptions related to certain assumptions within the projected cash flows.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the

consolidated financial statements.

These procedures included, among others, gaining an understanding of management's process for

developing the fair value estimate.

We also evaluated the expertise, qualifications, and independence of management’s specialist

engaged to complete the evaluation.

We used professionals inside our firm with specialized skills and knowledge to assess the

Company’s methodology.

In evaluating the Company’s assumptions, we compared them to historical results, financial

information subsequent to year end, and to customer orders to be filled.

Finally, we considered the sensitivity of their cash

flow model assumptions by assessing different scenarios.

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Concern — Refer to Note 3 to the consolidated financial statements

discussed in Note 3 to the financial statements, the Company has a working capital deficit and an accumulated deficit, that are negative

indicators which raise doubt about their ability to continue as a going concern.

The Company has concluded that positive factors including

the ability of financing as indicated by the private placement during the year, the addition of a significant acquisition with positive

cash flows, and the amount of cash on hand at year end are sufficient to satisfy obligations for one year from the date of this report.

The Company’s analysis requires that they estimate whether these factors are sufficient to cover obligations and negate historical

These valuation methods require management to make significant estimates and assumptions related to projected cash flows.

identified going concern as a critical audit matter because of the significant estimates and assumptions made by management to estimate

future cash flows and the current condition that reverse negative trends.

This required a high degree of auditor judgment and an increased

extent of effort.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated

financial statements.

These procedures included, among others, gaining an understanding of management’s process for assessing their

ability to continue as a going concern.

We considered the plausibility of each factor described in management’s plan.

considered the Company’s projected use of cash for the year based on funds available using historical trends and existing obligations.

We also evaluated the impact of the Company’s new acquisition on the available cash in-flows also by comparing historical trends.

Finally, we considered the improvements to their existing condition and availability of capital by confirming terms with their largest

Acquisition- Refer to Note 4 to the consolidated financial statements

discussed in Note 4 to the consolidated financial statements, the Company acquired Dangot Computers Ltd., an Israel Company, for purchase

consideration of $13,052 (in thousands).

As part of the transaction, the Company acquired tangible assets, identifiable intangible assets,

and goodwill.

The allocation of the purchase price requires management to make significant judgement regarding the assigned value to

intangible assets.

identified the business acquisition as a critical audit matter because management’s assessment of the acquisition is highly subjective.

Auditor judgment and an increased extent of effort, including the need to involve our internal valuation specialist, when performing

audit procedures to evaluate the reasonableness of management’s estimates and assumptions.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated

financial statements.

These procedures included, among others, gaining an understanding of management’s process for developing

the fair value estimate.

We also evaluated the expertise, qualifications, and independence of management’s specialist engaged to

complete the evaluation.

We used professionals inside our firm with specialized skills and knowledge to assess the Company’s methodology.

In evaluating the Company’s assumptions, we compared them to historical results, financial information subsequent to year end,

and to customer orders to be filled.

Finally, we considered the inputs, sources of data used, assumptions, and estimates to determine

the acquisition date fair value.

We tested the mathematical accuracy of the underlying schedules used in the valuation assessment to

ensure the completeness and accuracy of the reports.

Haynie & Company

have served as the Company’s auditor since 2019.

Lake City, Utah

have served as the Company’s auditor since 2019.

BALANCE SHEETS

of December 31,

( In thousands, except share and per share data)

thousands, except share and per share data)

and cash equivalents

receivable, net

current assets

Cash and cash equivalents

Accounts receivable, net

Prepaid expenses

Other current assets

Total current assets

Property and equipment, net of accumulated depreciation of $600 and

$2,195, respectively

Trade name, net of accumulated amortization of $3,362 and

$2,932, respectively

Customer relationships, net of accumulated amortization of $8,111

and $6,578, respectively

Other intangibles, net of accumulated amortization of $382

and $185, respectively

Cash, restricted

Right of Use asset

LIABILITIES AND STOCKHOLDERS’

current assets

and equipment, net of accumulated depreciation of $ 2,203

name, net of accumulated amortization of $ 3,863

and $ 3,362 ,

relationships, net of accumulated amortization of $ 9,660

intangibles, net of accumulated amortization of $ 1,457

of use lease assets

AND EQUITY (DEFICIT)

payable and accrued liabilities

payroll and sales tax

payable, related parties – current portion

payable – current portion

liability – current portion

current liabilities

Accounts payable and accrued liabilities

Line of credit

Accrued payroll and sales tax

Notes payable, related parties –

current portion

Notes payable –

current portion

Lease liability –

current portion

Other current liabilities

Total current liabilities

current liabilities

term liabilities

payable, related party, less current portion

interest and accrued liabilities, related party

payable, less current portion

long term liabilities

Notes payable, related party, less current portion

Accrued interest and accrued liabilities, related party

Notes payable, less current portion

Lease liability, less current portion

Other long term liabilities

Total liabilities

Stockholders’

equity (Deficit)

Series A Preferred stock;

0.001 par value;

1,000,000 shares designated, 0 shares issued and outstanding

Series B Preferred stock;

0.001 par value;

1 share designated, 0 shares issued and outstanding

Series C Preferred stock;

0.001 par value;

A Preferred stock;

shares designated, 0

shares issued and outstanding

B Preferred stock;

share designated, 0

shares issued and outstanding

C Preferred stock;

shares designated, 544,500

shares issued and outstanding, respectively

15,000,000 shares

designated, 2,145,030 and 4,828,530 shares issued and Outstanding, respectively

Common stock;

0.001 par value;

15,000,000 shares authorized;

4,684,736 and 3,960,405 shares issued and outstanding, respectively.

Additional paid-in capital

Accumulated (deficit)

Accumulated other comprehensive loss

Total stockholders’

Total liabilities and stockholders’

and 4,684,736

shares issued and outstanding, respectively.

paid-in capital

other comprehensive loss

OmniQ stockholders’ deficit

Non-controlling

EQUITY (DEFICIT)

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

STATEMENTS OF OPERATIONS

liabilities and equity (deficit)

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

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

the Years Ended December 31,

thousands, except share and per share data)

Revenues, net

of goods sold

and development

general and administrative

operating expenses

from operations

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(expenses) income

other expense

other expenses

loss before income taxes

benefit for Income Taxes

income tax benefit (provision)

loss from continuing operations

Preferred stock –

series C dividend

loss attributable to the common stockholders

for income taxes

Current, net of deferred

provision for income taxes

income attributable to noncontrolling interest

loss attributable to OmniQ Corp

currency translation adjustment

comprehensive income (loss)

loss per share –

average number of common shares outstanding –

basic and diluted

Comprehensive

Less comprehensive loss attributable to noncontrolling

Comprehensive loss attributable to OmniQ Corp

Reconciliation

of net loss to net loss after series C dividend attributable to common stockholders’ of OmniQ Corp

Preferred stock – Series C dividend

loss less series C dividend

income attributable to noncontrolling interest

loss after series C dividend attributable to common stockholders’ of OmniQ Corp

loss per share - basic and diluted attributable to common stockholders’ of OmniQ Corp

average number of common shares outstanding - basic

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

STATEMENT OF STOCKHOLDERS’

EQUITY (DEFICIT)

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

the Years Ended December 31, 2021 and 2020

Preferred Stock

Stockholders’

Comprehensive

Stockholders’

(In thousands)

Income (Loss)

Balance, December 31, 2018

Dividend on Class C Shares

ESPP Stock Issuance

Stock-based compensation –

options, warrants, issuances

Stock and warrant issuances, net of issuance costs

Purchase price adjustment –

shares to be received

Stock redemption

Conversion of debt

Balance, December 31, 2019

Dividend on Class C Shares

ESPP Stock Issuance

Stock-based compensation –

options, warrants, issuances

Stock and warrant issuance for services

Stock and warrant issued for Acquisition

Cumulative Translation Adjustment

December 31, 2019

on Class C shares

Stock Issuance

compensation – options, warrants, issuances

and warrant issued for services

Dividend declared to non controlling interest

and warrant issuances, net of issuance costs

and warrant issuances, net of issuance costs, shares

of stock options and warrants

Conversion of debt

Balance, December 31, 2020

and warrant issuance for acquisition

to purchase additional Dangot shares

Post-acquisition

translation adjustment

acquisition adjustment

December 31, 2020

on Class C shares

Dividend declared to non controlling interest

stock issuance

compensation – options, warrants, issuances

and warrant issued for services

and warrant issuances, net of issuance costs

of stock options and warrants

and warrant issuance for Acquisition

to purchase additional Dangot shares

Post-acquisition

translation adjustment

income (loss )

December 31, 2021

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

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the Years Ended December 31,

(In thousands, except share and per share data)

Cash flows from operations

Adjustments to reconcile net loss to net cash provided by operating activities:

Early extinguishment of debt

Stock-based compensation

Stock and warrant issued for services

Depreciation and amortization

Amortization of ROU asset

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses

Accounts payable and accrued liabilities

Accrued interest and accrued liabilities, related party

Accrued payroll and sales taxes payable

Lease liability

Other liabilities

Net cash (used in) provided by operating activities

Cash flows from investing activities

Purchase of property and equipment

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from ESPP stock issuance

Proceeds from sale of common stock

Payments on notes/loans payable

Proceeds from the issuance of notes/loans payable

Proceeds from (payments on) line of credit

Net cash (used in) provided by financing activities

Net increase in cash

Foreign currency translation adjustment

Cash beginning of year

Cash, end of year

Cash paid for interest

Cash paid for taxes

Supplementary for non-cash flow information:

Stock issued for services

Accounts payable converted to notes payable

Debt conversion

Change in terms of accounts payable

flows from operations

to reconcile net loss to net cash used in operating activities:

extinguishment of debt

and warrant issued for services

and amortization

in operating assets and liabilities:

payable and accrued liabilities

interest and accrued liabilities, related party

payroll and sales taxes payable

tax assets, net

cash used in operating activities

flows from investing activities

for additional ownership in subsidiary

for acquisition, net of cash acquired

of property and equipment

from sale of other assets

cash provided by (used in) investing activities

flows from financing activities

from ESPP stock issuance

from exercise of options and warrants

paid to non-controlling interests

proceeds from issuance of common stock

on notes/loans payable

from the issuance of notes/loans payable

from draw on line of credit

cash provided by financing activities

change in cash and cash equivalents

of foreign exchange rates on cash and cash equivalents

and cash equivalents at beginning of period

and cash equivalents at end of period

issued for services

dividends payable

assets acquired in business combination

of PP&E with financing

of use asset acquired in exchange for lease liability

in terms of accounts payable

disclosure of cash flow information:

paid for interest

paid for income taxes

accompanying notes are integral to these consolidated financial statements.

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1 – NATURE OF OPERATIONS

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

Corp., a Delaware corporation, formerly Quest Solution, Inc., together with its majority and wholly owned subsidiaries, referred

to herein as “we,” “us,” and “our” (“OMNIQ” or the “Company”), was incorporated

Since its incorporation, the Company has been involved in various lines of business.

2008 and 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

Our strategy developed into leveraging management’s relationships in the business world for investments for the Company.

2014, we have made the following acquisitions resulting in us becoming a leading provider of computerized and machine vision image

processing solutions:

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.

strategy developed into leveraging management’s relationships in the business world for investments for the Company.

2014, we have made the following acquisitions resulting in us becoming a leading provider of computerized and machine vision image processing

Solutions, Inc.

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ViascanQdata,

Inc (October 2015 –

later sold in September 2016)

Inc (October 2015 – later sold in September 2016)

Image Processing, Inc.

2 unchanged sentences

(February 2020)

Computers Ltd.

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.

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.

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.

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.

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, that, among other stipulations, effectively limited

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..

To date, 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.

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

Many State Governors issued temporary Executive Orders in 2020, that, among other stipulations, effectively limited 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.

To date, 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.

COVID-19 had a

more significant impact on our gross margin.

Total gross margin percentage dropped 5% for the year ended December 31, 2020 compared

The timing and the extent of the continued recovery 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.

2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our total revenues

for the year ended December 31, 2020, were 3.48 %

lower than those of the year ended December 31, 2019.

COVID-19 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 the continued recovery 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.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Consolidation and Basis of Presentation

consolidated financial statements include the financial position and results of operations of OMNIQ Corp.

and its wholly owned

subsidiaries Quest Marketing, Inc., Quest Exchange Ltd., and HTS Image Processing, Inc., collectively referred to herein as

“we”

or “us”

or “our”

or the “Company.”

and its wholly owned subsidiaries

Quest Marketing, Inc., Quest Exchange Ltd., and HTS Image Processing, Inc., OmniQ Tech Ltd., and majority owned subsidiary Dangot

Computers Ltd.

collectively referred to herein as “we” or “us” or “our” or the “Company.”

significant intercompany accounts and transactions have been eliminated in these consolidated financial statements.

1 unchanged sentence

are included in the consolidated financial statements from their respective dates of acquisition.

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

of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of

assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of

revenues and expenses during the reported period.

These assumptions and estimates could have a material effect on our consolidated

financial statements.

Actual results may differ materially from those estimates.

We review our estimates on an ongoing basis based

on information currently available, and changes in facts and circumstances may cause us to revise these estimates.

Cash Equivalents and Restricted Cash

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

which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities

and related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during

the reported period.

These assumptions and estimates could have a material effect on our consolidated financial statements.

Actual results

may differ materially from those estimates.

We review our estimates on an ongoing basis based on information currently available, and

changes in facts and circumstances may cause us to revise these estimates.

and Cash Equivalents

consists of petty cash, checking, savings, and money market accounts.

For the purpose of the statements of cash flows, all highly

liquid investments with an original maturity of three months or less are considered to be cash equivalents.

There were no cash

equivalents as of December 31, 2020 and 2019.

For the purpose of the statements of cash flows, all highly liquid

investments with an original maturity of three months or less are considered cash equivalents.

There were no

cash equivalents as of December 31, 2021 and

Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Company has restricted cash on deposit with a federally insured bank in the amount of $533 thousand at December

31, 2020 and 2019, respectively.

We manage credit risk associated with

our accounts receivables at the customer level.

Because the same customers typically generate the revenues that are accounted

for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) and Accounting

Standards Codification Topic 326, Credit Losses (Topic 326 )., the discussions below on credit risk and our allowances

for doubtful accounts address our total revenues from Topic 606 and Topic 326.

believe concentration of credit risk, with respect to our receivables, is limited because our customer base is comprised of a

number of geographically diverse customers.

We manage credit risk through credit approvals, credit limits and other monitoring

manage credit risk associated with our accounts receivables at the customer level.

Because the same customers typically generate the

revenues that are accounted for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic

606) and Accounting Standards Codification Topic 326, Credit Losses (Topic 326 )., the discussions below on credit risk and

our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 326.

believe concentration of credit risk, with respect to our receivables, is limited because our customer base is comprised of a number

of geographically diverse customers.

We manage credit risk through credit approvals, credit limits and other monitoring procedures.

to Topic 326 for our accounts receivables, we maintain an allowance for doubtful accounts that reflects our estimate of our expected

1 unchanged sentence

Our allowance is estimated using a loss rate model based on delinquency.

The estimated loss rate is based on our

historical experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable

forecasts, and our own judgment as to the likelihood of ultimate payment based upon available data.

We perform credit evaluations

of customers and establish credit limits based on reviews of our customers’

current credit information and payment histories.

We believe our credit risk is somewhat mitigated by our geographically diverse customer base and our credit evaluation procedures.

The actual rate of future credit losses, however, may not be similar to past experience.

Our estimate of doubtful accounts could

change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers.

Accordingly, we may be required to increase or decrease our allowance for doubtful accounts.

Based on management’s evaluation,

accounts receivable has a balance in the allowance for doubtful accounts of $28 thousand and $36 thousand for the years ended

December 31, 2020 and 2019, respectively.

The estimated loss rate is based on our historical

experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and

our own judgment as to the likelihood of ultimate payment based upon available data.

We perform credit evaluations of customers and establish

credit limits based on reviews of our customers’ current credit information and payment histories.

We believe our credit risk is

somewhat mitigated by our geographically diverse customer base and our credit evaluation procedures.

The actual rate of future credit

losses, however, may not be similar to past experience.

Our estimate of doubtful accounts could change based on changing circumstances,

including changes in the economy or in the particular circumstances of individual customers.

Accordingly, we may be required to increase

or decrease our allowance for doubtful accounts.

Based on management’s evaluation, accounts receivable has a balance in the allowance

for doubtful accounts of $ 6

thousand and $ 28

thousand for the years ended December 31, 2021

and 2020, respectively.

Substantially

all inventory consists of raw materials and finished goods and are valued at the lower of actual cost or net realizable

where net realizable value is considered to be estimated selling price in the ordinary course of business, less reasonably

predictable cost of completion, disposal and transportation.

all inventory consists of raw materials and finished goods and are valued at the lower of actual cost or net realizable value;

net realizable value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable

cost of completion, disposal and transportation.

and Equipment

and equipment are recorded at cost and depreciated using both straight-line over the estimated useful lives.

Ordinary repair

and maintenance costs are included in sales, general and administrative (“SG&A”) expenses on our consolidated

statements of operations.

However, expenditures for additions or improvements that significantly extend the useful life of

the asset are capitalized in the period incurred.

At the time assets are sold or disposed of, the cost and accumulated

depreciation are removed from their respective accounts and the related gains or losses are reflected in the statements of

operations in gains from sales of property and equipment, net.

and equipment are recorded at cost and depreciated using straight-line over the estimated useful lives.

Ordinary repair and maintenance

costs are included in sales, general and administrative (“SG&A”) expenses on our consolidated statements of operations.

However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period

At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts

and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net.

periodically evaluate the appropriateness of remaining depreciable lives assigned to property and equipment.

Leasehold improvements

are amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is

Depreciation expense for the years ended December 31, 2020 and 2019 was $178 thousand and $151 thousand, respectively.

we assign the following estimated useful lives to these categories:

Leasehold improvements are

amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is shorter.

Depreciation expense for the years ended December 31, 2021 and 2020 was $ 251

thousand and $ 178

thousand, respectively.

Generally, we assign

the following estimated useful lives to these categories:

OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT

Value of Financial Instruments

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between market participants at the measurement date.

The FASB fair value measurement guidance established a fair value hierarchy

that prioritizes the inputs used to measure fair value.

The FASB fair value measurement guidance established a fair value hierarchy that

prioritizes the inputs used to measure fair value.

The three broad levels of the fair value hierarchy are as follows:

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3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions

Assets and liabilities are classified

based on the lowest level of input that is significant to the fair value measurements.

We review the fair value hierarchy classification

on a quarterly basis.

Changes in the observable inputs may result in a reclassification of assets and liabilities within the three

levels of the hierarchy outlined above.

The carrying amounts of certain financial

instruments, such as cash equivalents, short term investments, accounts receivable, accounts payable and accrued liabilities,

approximate fair value due to their relatively short maturities.

and Intangibles

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.

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.

and liabilities are classified based on the lowest level of input that is significant to the fair value measurements.

We review the fair

value hierarchy classification on a quarterly basis.

Changes in the observable inputs may result in a reclassification of assets and

liabilities within the three levels of the hierarchy outlined above.

carrying amounts of certain financial instruments, such as cash equivalents, short term investments, accounts receivable, accounts payable

and accrued liabilities, approximate fair value due to their relatively short maturities.

Definite-lived

Intangible Assets

Company periodically evaluates the carrying value of definite-lived intangibles when events or changes in circumstances indicate that

the carrying value may not be recoverable.

Factors the Company considers important which could trigger an impairment review include,

but are not limited to, significant under-performance relative to historical or projected future operating results, significant changes

in the manner of its use of acquired assets or its overall business strategy, and significant industry or economic trends.

amortizes definite-lived intangible assets on a straight-line basis over their useful lives.

The Company recorded no impairment loss

for definite-lived intangible assets during the years ended December 31, 2021 and 2020.

the Company determines that the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of

the above indicators, the Company determines the recoverability by comparing the carrying amount of the asset to net future undiscounted

cash flows that the asset is expected to generate and recognizes an impairment charge equal to the amount by which the carrying amount

exceeds the fair market value of the asset.

the Company’s revenues or other estimated operating results are not achieved at or above our forecasted level, and the Company

is unable to recover such costs through price increases, the carrying value of certain of the Company’s intangible assets may prove

to be unrecoverable and we may incur impairment charges of definitive-live intangible assets.

Definite-lived

intangible assets are stated at cost, net of accumulated amortization.

The assets are being amortized on the straight-line method

over useful lives ranging from 3 to 11 years.

adopted ASU 2016-02, Leases (Topic 842):

effective January 1, 2019.

We determine whether an

arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract.

A contract contains

a lease if there is an identified asset and we have the right to control the asset for a period of time in exchange for consideration.

The assets are being amortized on the straight-line method over

useful lives ranging from 3 to 11 years with a remaining weighted average lifespan of 7.5 years.

Indefinite-lived

Intangible Assets, Including Goodwill

Indefinite-lived

intangible assets, including goodwill, are not amortized but are required to be reviewed for impairment at least annually or when events

or circumstances indicate that carrying value may exceed fair value.

The Company is permitted the option to first assess qualitative

factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the fair value

of the Company’s reporting unit is less than its corresponding carrying value.

If, after assessing the totality of events and circumstances,

the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its corresponding carrying

value then the Company is not required to take further action.

However, if the Company concludes otherwise, then the Company must calculate

the fair value of the reporting unit and compare it with its carrying amount, including Indefinite-lived intangible assets and recognize

impairment equal to the difference between the carrying amount of the reporting unit and its fair value, considering the related income

tax effect from any tax-deductible goodwill.

The estimated fair value of the reporting unit exceeded the carrying value as of December

31, 2021 and 2020, and, therefore, no impairment has been recognized.

determine whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract.

contract contains a lease if there is an identified asset and we have the right to control the asset for a period of time in exchange

for consideration.

Lease arrangements can take several forms.

Some arrangements are clearly within the scope of lease accounting, such as a real

estate contract that provides an explicit contractual right to use a building for a specified period of time in exchange for consideration.

However, the right to use an asset can also be conveyed through arrangements that are not leases in form, such as leases embedded

within service and supply contracts.

Some arrangements are clearly within the scope of lease accounting, such

as a real estate contract that provides an explicit contractual right to use a building for a specified period of time in exchange for

consideration.

However, the right to use an asset can also be conveyed through arrangements that are not leases in form, such as leases

embedded within service and supply contracts.

We analyze all arrangements with potential embedded leases to determine if an identified

asset is present, if substantive substitution rights are present, and if the arrangement provides the customer control of the

asset is present, if substantive substitution rights are present, and if the arrangement provides the customer control of the asset.

lease portfolio is substantially comprised of operating leases related to leases of real estate and improvements.

time, we may also lease various types of small equipment and vehicles.

lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities

From time to time,

we may also lease various types of small equipment and vehicles.

lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities

represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

at the commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide

the lessor’s implicit rate, we use our incremental borrowing rate (“IBR”) at the commencement date in determining

the present value of lease payments by utilizing a fully collateralized rate for a fully amortizing loan with the same term as

Operating lease ROU assets and liabilities are recognized at

the commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide the lessor’s

implicit rate, we use our incremental borrowing rate (“IBR”) at the commencement date in determining the present value of

lease payments by utilizing a fully collateralized rate for a fully amortizing loan with the same term as the lease.

terms include options to extend the lease when it is reasonably certain those options will be exercised.

For leases with terms

greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term.

can include rental escalation clauses, renewal options and/or termination options that are factored into our determination of

lease payments when such renewal options and/or termination options are reasonably certain of exercise.

For leases with terms greater

than 12 months, we record the related asset and obligation at the present value of lease payments over the term.

Our leases can include

rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when

such renewal options and/or termination options are reasonably certain of exercise.

ROU asset is subject to the same impairment guidance as assets categorized as plant, property, and equipment.

2 unchanged sentences

lease modification is a change to the terms and conditions of a contract that change the scope or consideration of a lease.

example, a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying

assets, or extends or shortens the contractual lease term, is a modification.

Depending on facts and circumstances, a lease modification

may be accounted as either:

a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying assets, or extends

or shortens the contractual lease term, is a modification.

Depending on facts and circumstances, a lease modification may be accounted

(1) the original lease plus the lease of a separate asset(s) or (2) a modified lease.

be remeasured if there are changes to the lease contract that do not give rise to a separate lease.

A lease will be remeasured if there

are changes to the lease contract that do not give rise to a separate lease.

Accounting and Business Combinations

account for our business combinations using the purchase method of accounting which requires that intangible assets be recognized

apart from goodwill if they are contractual in nature or separately identifiable.

Acquisitions are measured on the fair value

of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration

given or the fair value of the assets acquired, whichever is more reliably measurable.

The excess of cost of an acquired entity

over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill.

account for our business combinations using the purchase method of accounting which requires that intangible assets be recognized apart

from goodwill if they are contractual in nature or separately identifiable.

Acquisitions are measured on the fair value of consideration

exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration given or the fair

value of the assets acquired, whichever is more reliably measurable.

The excess of cost of an acquired entity over the fair value of

identifiable acquired assets and liabilities assumed is allocated to goodwill.

valuation and allocation processes rely on significant assumptions made by management.

In certain situations, the allocations

of excess purchase price are based upon preliminary estimates and assumptions.

Accordingly, the allocations are subject to revision

when we receive updated information, including appraisals and other analyses, which are completed within one year of the acquisition.

Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from

the acquisition date.

In certain situations, the allocations of excess

purchase price are based upon preliminary estimates and assumptions.

Accordingly, the allocations are subject to revision when we receive

updated information, including appraisals and other analyses, which are completed within one year of the acquisition.

Revisions to the

fair values, which may be significant, are recorded when pending information is finalized, within one year from the acquisition date.

Recognition .

entering into contracts with our customers, we review follow the five steps outline in Accounting Standards Codification Topic 606,

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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 we meet the criteria to be a principal or an agent and record the revenue on a

gross or net basis.

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 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.

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:

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 services.

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 service.

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.

This typically includes responsibility for the

acceptability of the specified good or service.

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.

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.

Establishing 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.

Establishing 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.

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 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:

The following indicators are evaluated

in determining when control has passed to the customer:

have a right to payment for the product or service,

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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.

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

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.

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

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.

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 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.

When we are considered

the principal, we recognize revenues on a gross basis at the point the software is delivered to and accepted by our customer.

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

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:

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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.

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

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 sale.

Recognition for Services.

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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.

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

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.

As 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.

November 20, 2019, we implemented a one-for-20 reverse stock split of the Company’s common stock.

The par value of common

stock and the number of authorized shares were not adjusted as a result of the reverse stock 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 this

reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in

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

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

immediately prior to the Effective Time, which resulted in a proportionate decrease in the number of shares of the Company’s

common stock reserved for issuance upon exercise or vesting of such stock options, Preferred stock, 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 Effective Time was reduced proportionately.

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.

The Company considers shipping

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

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.

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.

The Company estimates

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

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.

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.

The 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 straight-line

basis primarily over the vesting period of the options.

October 2021, OMNIQ’ 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,

shares of the Company’s common stock, par

value $ 0.001

(the “Shares”), were set aside and

reserved for issuance.

The Plan approved by our stockholders at the December 2021, shareholders’ meeting.

shares were issued in 2021 as part of the

August 2020, the Board of Directors approved our 2020 Equity Incentive Plan and later amended it.

In September 2020, our

shareholders adopted and ratified the 2020 Equity Incentive Plan.

The total number of shares of Common Stock authorized for issuance

under the 2020 Plan is 1,000,000.

In September 2020, our shareholders

adopted and ratified the 2020 Equity Incentive Plan.

The total number of shares of Common Stock authorized for issuance under the 2020

Plan is 1,000,000 .

instruments issued to parties other than employees for acquiring goods or services

Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance

of section 505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”).

Pursuant to FASB

ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments

are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever

is more reliably measurable.

The measurement date used to determine the fair value of the equity instrument issued is the earlier

of the date on which the performance is complete or the date on which it is probable that performance will occur.

fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the

input of subjective assumptions, including the expected term of the warrants, expected stock price volatility, and expected dividends.

These estimates involve inherent uncertainties and the application of management’s judgment.

Expected volatilities used

in the valuation model are based on the average volatility of the Company’s stock.

The risk-free rate for the expected term

of the option is based on the United States Treasury yield curve in effect at the time of grant.

Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section

505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”).

Pursuant to FASB ASC Section 505-50-30,

all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based

on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance

is complete or the date on which it is probable that performance will occur.

fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the input

of subjective assumptions, including the expected term of the warrants, expected stock price volatility, and expected dividends.

estimates involve inherent uncertainties and the application of management’s judgment.

Expected volatilities used in the valuation

model are based on the average volatility of the Company’s stock.

The risk-free rate for the expected term of the option is based

on the United States Treasury yield curve in effect at the time of grant.

Company expenses marketing and advertising costs as incurred.

During 2020 and 2019, the Company spent $283 thousand

and $224 thousand, respectively, on marketing, trade show and store front expense and advertising, net of co-operative rebates.

During 2021 and 2020, the Company spent $ 213

thousand and $ 283

thousand, respectively, on marketing, trade show

and store front expense and advertising, net of co-operative rebates.

Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers.

These rebates

have been recorded as a reduction to the related advertising and marketing expense.

These rebates have

been recorded as a reduction to the related advertising and marketing expense.

Currency Translation

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in currencies other than the functional currency are recorded using the appropriate exchange rate at the time of the transaction.

All of our continuing operations are conducted in U.S.

our continuing operations are conducted in U.S.

dollars except its subsidiary located in Israel.

The records of the Israeli

operation were maintained in the local currency and re-measured to the functional currency as follows:

monetary assets and liabilities

are converted using the balance sheet period-end date exchange rate, while the non-monetary assets and liabilities are converted

using the historical exchange rate.

Expenses and income items are converted using the weighted average exchange rates for the

reporting period.

Foreign transaction gains and losses are reported on the consolidated statement of operations and were included

in the amount of loss from comprehensive income.

account for our income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred

tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts

of existing assets and liabilities and their respective tax bases and tax credit carry forwards.

Deferred tax assets and liabilities

are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are

expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized

in operations in the period that includes the enactment date.

The records of the Israeli operation

were maintained in the local currency and re-measured to the functional currency as follows:

monetary assets and liabilities are converted

using the balance sheet period-end date exchange rate, while the non-monetary assets and liabilities are converted using the historical

exchange rate.

Expenses and income items are converted using the weighted average exchange rates for the reporting period.

Foreign transaction

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

of loss from comprehensive income.

account for our income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets

and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing

assets and liabilities and their respective tax bases and tax credit carry forwards.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that

includes the enactment date.

tax expense is based on reported earnings before income taxes.

Deferred income taxes reflect the impact of temporary differences

between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes

and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

Deferred income taxes reflect the impact of temporary differences between

assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes and are

measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.

also follow the guidance related to accounting for income tax uncertainties.

In accounting for uncertainty in income taxes, the

Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would

more likely than not sustain the position following an audit.

For tax positions meeting the more likely than not threshold, the

amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized

upon ultimate settlement with the relevant tax authority.

In accounting for uncertainty in income taxes, the Company

recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely

than not sustain the position following an audit.

For tax positions meeting the more likely than not threshold, the amount recognized

in the financial statements is the largest benefit that has a greater

than 50% likelihood of being realized upon ultimate

settlement with the relevant tax authority.

income is subject to taxation in both the U.S.

and a foreign jurisdiction, Israel.

Significant judgment is required in evaluating

the Company’s tax positions and determining its provision for income taxes.

The Company establishes reserves for income

tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

These reserves

for tax contingencies are established when the we believe positions do not meet the more-likely-than-not recognition threshold.

We adjust uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse

of a statute of limitations.

The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities

that are considered appropriate.

Significant judgment is required in evaluating the

Company’s tax positions and determining its provision for income taxes.

The Company establishes reserves for income tax-related

uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

These reserves for tax contingencies

are established when we believe positions do not meet the more-likely-than-not recognition threshold.

We adjust uncertain tax liabilities

in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.

The provision

for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

Comprehensive

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Comprehensive

income (loss) is defined as a change in equity of a business enterprise during a period from transactions and other events and

circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments

by owners and distributions to owners.

income (loss) is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances

from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions

Our other comprehensive income (loss) is composed of foreign currency translation adjustments.

Loss Per Common Share

NOTE 14 regarding our 1-for-20 reverse stock split.

Share related amounts have been retroactively adjusted in this report

to reflect this reverse stock-split for all periods presented.

loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”.

Basic net loss per common share

(“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares

outstanding for the period.

Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding,

assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive.

The weighted-average number of common

shares outstanding for computing basic EPS for the years ended December 31, 2020 and December 31, 2019 were 4,322,303 and 3,889,478,

loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”.

Basic net loss per common share (“EPS”)

is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential

common shares were issued, unless doing so is anti-dilutive.

The weighted-average number of common shares outstanding for computing basic

EPS for the years ended December 31, 2021 and December 31, 2020 were 6,082,763

and 4,322,303 ,

respectively.

1 unchanged sentence

of potentially dilutive securities are antidilutive.

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:

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:

OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNINGS PER SHARE

Options to purchase common stock

Convertible preferred stock

Warrants to purchase common stock

Potential shares excluded from diluted net loss per share

Reclassifications

and Comparability

amounts in the financial statements of prior years have been reclassified to conform to the current year presentation for comparative

This had no effect on total assets or net income.

Warrants to purchase

Potential shares excluded

from diluted net loss per share

of an Immaterial Error

the year ended December 31, 2021, the Company identified an error related to its calculation of net loss attributable to the common stockholders.

The Company determined that in the prior period reported, these amounts were improperly calculated.

This error did not affect net income,

assets, liabilities, stockholders’ equity, cash flows from financing activities or the net increase or decrease in cash and cash

equivalents for the period.

In accordance with the SEC Staff Accounting Bulletin (SAB) No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,”

we evaluated the materiality of the error from qualitative and quantitative perspectives and concluded that the error was immaterial

to the current and prior periods mentioned above.

Consequently, the net loss per share – basic attributable to common stockholders

of OmniQ Corp contained in these financial statements have been restated for the year ended December 31, 2020.

The change resulted in

an additional net loss after series C dividend attributable to common stockholders’ of OmniQ Corp $ 382

thousand, and an increase of the net loss per

share - basic attributable to common stockholders’ of OmniQ Corp of $ 0.03

for the year ended December 31, 2020.

Accounting Pronouncements

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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.

March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate

Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited time to ease the potential

burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London

Interbank Offered Rate (“LIBOR”) on financial reporting.

The guidance provides optional expedients and exceptions

for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria

The amendments are elective and are effective upon issuance for all entities through December 31, 2022.

The amendments

of this ASU should be applied on a prospective basis.

We intend to continue to monitor the developments with respect to the planned

phase-out out of LIBOR after 2021 and work with our lenders to seek to ensure any transition away from LIBOR will have minimal

impact on our financial condition.

However, we can provide no assurances regarding the impact of the discontinuation of LIBOR

as there can be no assurances as to whether such replacement or alternative base rate will be more or less favorable than LIBOR.

Our exposure related to the expected cessation of LIBOR is limited to the interest expense we incur on balances outstanding under

our Credit Facility.

The potential impact from the cessation of LIBOR as a reference rate, as well as the applicability of ASU

2020-04, is not currently estimable.

Facilitation of the Effects of Reference Rate Reform

on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited time to ease the potential burden

in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London Interbank Offered

Rate (“LIBOR”) on financial reporting.

The guidance provides optional expedients and exceptions for applying GAAP to contracts,

hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments are elective

and are effective upon issuance for all entities through December 31, 2022.

The amendments of this ASU should be applied on a prospective

We intend to continue to monitor the developments with respect to the planned phase-out out of LIBOR after 2021 and work with

our lenders to seek to ensure any transition away from LIBOR will have minimal impact on our financial condition.

However, we can provide

no assurances regarding the impact of the discontinuation of LIBOR as there can be no assurances as to whether such replacement or alternative

base rate will be more or less favorable than LIBOR.

Our exposure related to the expected cessation of LIBOR is limited to the interest

expense we incur on balances outstanding under our Credit Facility.

The potential impact from the cessation of LIBOR as a reference rate,

as well as the applicability of ASU 2020-04, is not currently estimable.

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 Accounting Standard Codification

Topic 606 (Revenue from Contracts with Customers), 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

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.

January 1, 2021, we adopted Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying 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.

The adoption of

ASU 2019-12 did not have a material impact on our consolidated financial statements and footnotes.

3 – GOING CONCERN

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

As of December

31, 2020, we had a working capital deficit of $25.3 million and an accumulated deficit of $56.7 million.

and others raise substantial doubt about the Company’s 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 maintaining moderate cost reductions (subsequent to aggressive cost reduction actions implemented

in previous years);

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 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;

In 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.

The Company has 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.

BUSINESS ACQUISITION

February 2020, (the “Closing Date”), we entered into an Asset Purchase Agreement (the “Eyepax Agreement”),

with Eyepax IT Consulting, LLC (the “Seller”);

whereby, we acquired Seller’s accounts receivable and the license,

ownership rights and source code of the parking Enforcement and Revenue Control System.

The Company also assumed the Seller’s

accounts payable liabilities.

The following are the principal conditions or events which potentially raise substantial doubt about the company’s ability to

continue as a going concern:

Balancing the need for operational cash with the need to add additional

Timely and cost-effective development of products

Working capital deficit of $ 23 million as of December 31, 2021

Accumulated deficit of $ 71 million as of December 31, 2021

Multiple years of losses from operations

Multiple years of negative cash flows from operations

facts and others have in the past raised concerns about the Company’s 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,

which we have successfully accomplished to date.

following conditions, plans and actions are currently being implemented by management to address the Company’s conditions:

Company has common stock which is now traded publicly on the NASDAQ stock exchange.

Accordingly, it is better able to successfully

raise capital when needed.

In addition, there are outstanding warrants from prior offerings that could be exercised depending upon

the performance of our stock.

Company raised gross proceeds of $ 15 million from a private placement of its common stock in July 2021.

Company’s acquisition of Dangot Computers, Ltd.

has improved the balance sheet, profitability, and cash flow, including positive

cash flows from operations of $ 570 thousand since the acquisition, and is expected to help the Company as a whole to generate positive

cash flows from operations for the foreseeable future.

Company expects to receive financing for the acquisition of the last 23% of shares of Dangot at a loan to value rate of 85%.

Company also expects that Dangot’s cashflow will be able to service the debts associated with its acquisition without the need

for cash from the rest of the group.

acquisition of Dangot has added capabilities to the Company which have already transformed into significant new orders (so far approx.

$ 1.3 M) in the Parking segment.

Management expects the collaboration and cross sales to contribute to improved revenues and margins.

is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations.

is in the final steps of receiving a $ 8.5 M line of credit from Western Alliance Bank.

This line of credit will replace the high interest

Action Capital line of Credit ($ 6 M) and settle the ScanSource debt $ 2.5 M.

Overall the effective interest rate of the new line of

credit is approx.

7% compared to 12% with Action and 10% with ScanSource.

of December 31, 2021, the Company had approximately $ 7 million, in cash, which is sufficient cash to last 15 months at the current

According to our sensitivity analysis the Company would have to miss it’s projection by over 17% to be at risk at

the end of March 2023.

results - For over ten years, the Company’s audit opinion has contained an explanatory paragraph describing an uncertainty

about the Company’s ability to continue as a going concern.

The fact that the Company has a ten plus year plus history of continuing

operations, in and of itself, demonstrates an ability to continue for a period of 12 months, post-issuance of each report.

Star - The Company’s total accounts payable due to Blue Star as of December 31, 2021 was approximately $ 29 M.

Blue Star is an unsecured creditor, financing a substantial amount the Company’s supply chain demand.

Blue Star continues selling

to the Company with preferable credit terms.

Blue Star has agreed to reduce the annual interest rate on invoices that are past due to

We anticipate, consistent with prior periods, Blue Star will continue to extend us such preferable payments terms in the foreseeable

As an unsecured creditor of the Company, Blue Star has no incentive to force a liquidation.

The Company has enjoyed a good mutual

relationship for the past four years.

in 2022 the Company expects positive cash flow from operations.

believes that the aggregate impact of these plans is to mitigate the conditions raising substantial doubt about the Company’s ability

to continue as a going concern within one year after the date financial statement issuance.

4 – BUSINESS ACQUISITIONS

IT Consulting, LLC

February 2020, (the “Closing Date”), we entered into an Asset Purchase Agreement (the “Eyepax Agreement”), with

Eyepax IT Consulting, LLC (the “Seller”);

whereby, we acquired Seller’s accounts receivable and the license, ownership

rights and source code of the parking Enforcement and Revenue Control System.

The Company also assumed the Seller’s accounts payable

Pursuant to the terms of the Eyepax Agreement, the purchase price paid was to be paid as follows:

was paid on the Closing Date, less $5,000 previously paid as an advance payment, accordingly the remaining balance paid in

cash on Closing Date was $95,000.

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

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

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

shares of the Company’s common stock in the name of the Seller, were issued during 45 days from Closing Date at $5.50

was paid on the Closing Date, less $ 5,000

previously paid as an advance payment, accordingly

the remaining balance paid in cash on Closing Date was $ 95,000 .

per month for three months to be paid on

or before the last business day of the month beginning with the first month after the Closing Date, and a fourth payment of $ 20,000

until a total of $ 95,000

has been made.

on the first month after Closing Date, $ 5,000

per month to be paid in ten (10) monthly

installments.

shares of the Company’s common stock in the

name of the Seller, were issued during 45 days from Closing Date at $ 5.50

per common share.

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

shares vest in equal quarterly periods, expiring in February 2023.

options to purchase 20,000

shares of the Company’s common stock

at an exercise price of $ 5.00

The option shares vest in equal

quarterly periods, expiring in February

purchase price was measured at fair value on the Closing Date as follows (in thousands):

OF FAIR VALUE OF PURCHASE PRICE

Cash payments to Seller

1 unchanged sentence

Stock purchase options

assets acquired and liabilities assumed have been recognized at the Closing date and were measured at fair value as follows (in

Accounts receivable

Software (intangible)

Liabilities assumed

Net assets acquired at fair value

Total purchase price

Goodwill recognized

estimated the fair value the stock purchase option using the Black-Scholes option valuation model which incorporates assumptions

as to stock price volatility, the expected life of the options, risk-free interest rate and dividend yield.

In valuing these options,

the Company assumed a cumulative stock volatility of 269.42%, 36 months expected life, and a risk-free interest rate of 1.160%

assets acquired and liabilities assumed have been recognized at the Closing date and were measured at fair value as follows (in thousands):

OF RECOGNIZED FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

assets acquired at fair value

purchase price

estimated the fair value the stock purchase option using the Black-Scholes option valuation model which incorporates assumptions as to

stock price volatility, the expected life of the options, risk-free interest rate and dividend yield.

In valuing these options, the Company

assumed a cumulative stock volatility of 269.42 %,

months expected life, and a risk-free interest

rate of 1.160 %

and dividend yield of 0 %.

Computers Ltd

May 3, 2021, the Company and Omniq Technologies Ltd., a wholly owned subsidiary of the Company (“Omniq Technologies”) entered

into a share purchase agreement (the “Dangot Share Purchase Agreement”) with Mr.

Pursuant to the Dangot Share

Purchase Agreement, Omniq Technologies agreed to purchase 51 %,

shares, of the capital stock of Dangot Computers

Ltd., an Israel company (“Dangot”), from Dangot’s sole shareholder, Haim Dangot, for consideration equivalent to 23,740,500

NIS (New Israeli Shekel), which is equal to US$ 7.6

million (the “Closing Consideration”),

based on the then current exchange rate at the date of acquisition of NIS to dollars.

Closing Consideration was paid on July 8, 2021 in the following manner:

(a) the Company issued 220,103

shares of its common stock having a share value

thousand and (b) cash in the amount of $ 5,058

thousand and $ 600

payable to owner .

Dangot also granted Omniq Technologies an irrevocable option to purchase the remaining 4,900

shares, or 49 %,

of Dangot’s capital stock (the “Dangot Option”) in the 12-month period following the closing date (the “Dangot

Option Period”) at a share purchase price of 465,500

NIS, which is equal to

thousand, per each 1 %

of Dangot’s remaining shares on a fully diluted basis which is the same valuation per share as the purchase price for the 51 %.

Effective October 1, 2021 the Company exercised a portion of its option and purchased an additional 26 % of Dangot bringing its ownership

The Company paid $ 4,012,000 to purchase the additional shares.

OmniQ Technologies has the right to complete the purchase of the

remaining 23 % of the Dangot shares on a fully diluted basis in a single exercise until the lapse of the Dangot Option Period.

partial exercise shall be allowed.

following table summarizes the consideration given and the purchase price allocation:

OF RECOGNIZED FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED

Purchase Price Consideration

(in thousands)

Consideration

Cash payments

Accrued payable to owner

Fair value of stock issued ( 220,103

Total consideration

Accounts Receivable

Property and equipment

Customer relationship

Other intangible assets

Assets acquired

Current liabilities assumed

Non-controlling interest

Net assets acquired

following proforma unaudited revenue and earnings as if the acquisition had been included in the consolidated results of the company

for the full year ending December 31, 2021.

OF ACQUISITIONS UNAUDITED REVENUE

(in thousands/unaudited)

pro forma results for each acquisition are not disclosed, as individually these acquisitions would not have a material impact on the

Company’s financial statements.

the acquisition the amounts included in the consolidated statement of comprehensive income from Dangot Computers Ltd.

for the year ended

December 31, 2021, was $ 20.6

million in revenue and $ 566

thousand in net income.

5 – ACCOUNTS RECEIVABLE

receivable consisted of the following as of December 31:

OF ACCOUNTS RECEIVABLE

Trade Accounts Receivable

Less Allowance for doubtful accounts

Total Accounts Receivable (net)

the years ended December 31, 2020 and 2019, one customer accounted for 37.2% and 12.3%, respectively,

of the Company’s revenues.

receivable at December 31, 2020 and 2019 are made up of trade receivables due from customers in the ordinary course

One customer represented 35.4% of the balance of accounts receivable at December 31, 2020

and two customers made up 20.9% of the accounts receivable balance at December 31 for 2019, which represented

greater than 10% of total accounts receivable at December 31, 2020 and 2019, respectively.

Less Allowance for doubtful

Total Accounts Receivable

receivable as of December 31, 2021 and 2020 are made up of trade receivables due from customers in the ordinary course of business.

customer represented 17 %

of the balance of accounts receivable as of December 31, 2021, and 46 %

of the accounts receivable balance as of December 31, 2020.

6 – INVENTORY

consisted of the following as of December 31:

Raw Materials

Work in process

Finished goods (less Allowance)

Total inventories

goods (less Allowance)

7 – PROPERTY AND EQUIPMENT

following is a summary of the components of property and equipment (in thousands):

OF PROPERTY AND EQUIPMENT

of December 31,

Manufacturing and lab equipment

Leasehold improvements

Software and computer equipment

Furniture and equipment

expense for the year ended December 31, 2021 was approximately $ 251

Depreciation expense for the year ended December 31, 2020 was approximately $ 178

8 – GOODWILL AND INTANGIBLE ASSETS

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

Based on our analysis there have been

no impairment charges recorded against goodwill in 2020 and 2019.

Identifiable intangible assets are stated at cost,

net of accumulated amortization.

The assets are being amortized on the straight-line method over the estimated useful lives

ranging from 3 to 11 years.

Amortization expense for the years ended December 31, 2020 and 2019 was $2.1 million

and $2.0 million, respectively.

Based on our analysis there have been no

impairment charges recorded against goodwill

in 2021 and 2020.

Identifiable intangible assets are stated at cost, net of accumulated amortization.

The assets are being amortized

on the straight-line method over the estimated useful lives ranging from 3

Amortization expense for the years ended

December 31, 2021 and 2020 was $ 3.2

million and $ 2.1

million, respectively.

and Intangible assets consisted of the following as of December 31:

Customer Relationships

Intellectual property

Accumulated amortization

Intangibles, net

future amortization expense on the Customer Relationships, and IP are as follows:

OF GOODWILL AND INTANGIBLE ASSETS

relationships

future amortization expense on the Trade names, Customer relationships, and Other intangibles are as follows:

OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

Years ending December 31,

is not amortized but is evaluated for impairment annually or when indicators of a potential impairment are present.

The impairment

testing of goodwill is performed separately from our impairment testing of intangibles.

The annual evaluation for impairment of

goodwill and intangibles is based on valuation models that incorporate assumptions and internal projections of expected future

cash flows and operating plans.

The impairment testing

of goodwill is performed separately from our impairment testing of intangibles.

The annual evaluation for impairment of goodwill and

intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating

None of the goodwill is deductible for income tax purposes.

intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method

for customer relationships and trade names) to their estimated residual values, if any.

The Company’s finite-lived intangible

assets consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being

amortized over periods ranging from two to nine years.

Purchased intangible assets are reviewed annually to determine if facts

and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may

not be recoverable.

If such facts and circumstances exist, recoverability is assessed by comparing the projected undiscounted

net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying

intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method for

customer relationships and trade names) to their estimated residual values, if any.

The Company’s finite-lived intangible assets

consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being amortized over

periods ranging from two

Purchased intangible assets are reviewed

annually to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying

amount of assets may not be recoverable.

If such facts and circumstances exist, recoverability is assessed by comparing the projected

undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective

carrying amounts.

Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets.

If the useful

life is shorter than originally estimated, the rate of amortization is accelerated, and the remaining carrying value is amortized

over the new shorter useful life.

No impairments were identified or changes to estimated useful lives have been recorded as of

December 31, 2020 and 2019.

life is shorter than originally estimated, the rate of amortization is accelerated, and the remaining carrying value is amortized over

the new shorter useful life.

impairments were identified or changes to estimated useful

lives have been recorded as of December 31, 2021 and 2020.

9 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

payable are made up of payables due to vendors 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, which represented greater than 10% of total

accounts payable at December 31, 2020 and 2019, respectively.

payable are made up of payables due to vendors in the ordinary course of business a December 31, 2021 and 2020.

One vendor made up 65 %

of our purchases in 2021 and 2020, respectively.

10 – CREDIT FACILITIES AND LINE OF CREDIT

maintain operating lines of credit, factoring and revolving credit facilities with banks and finance companies to provide us working

July 2016, we entered into a Factoring and Security Agreement (the “FASA”) with Action Capital Corporation (“Action”)

to establish a sale of accounts receivable credit facility, whereby we may obtain short-term financing by selling and assigning

acceptable accounts receivable to Action.

Pursuant to the FASA, the outstanding principal amount of advances made by Action at

any time shall not exceed $5.0 million.

Action reserves and withholds to 5% of the face amount of each account purchased in a

reserve account.

As of December 31, 2020 and 2019, the balance outstanding was $4,914 thousand and $1,365 thousand,

respectively.

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

basis) is equal to the “Prime Rate”

of Wells Fargo Bank N.A.

plus 2.0%, plus a monthly fee equal to 0.75% of the average

outstanding balance.

July 2016, we entered into a Factoring and Security Agreement (the “FASA”) with Action Capital Corporation (“Action”)

to establish a sale of accounts receivable credit facility, whereby we may obtain short-term financing by selling and assigning acceptable

accounts receivable to Action.

Pursuant to the FASA, the outstanding principal amount of advances made by Action at any time shall not

Action reserves and withholds to

of the face amount of each account purchased in a reserve account.

As of December 31, 2021 and 2020, the balance outstanding was $ 5,951

thousand and $ 4,914

thousand, respectively.

annual interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a monthly basis)

is equal to the “Prime Rate” of Wells Fargo Bank N.A.

plus a monthly fee equal to 0.75 %

of the average outstanding balance.

we also pay all other costs incurred by Action under the FASA, including all bank fees.

The FASA continues

in full force and effect unless terminated by either party upon 30 days’

prior written notice.

continues in full force and effect unless terminated by either party upon 30 days’ prior written notice.

The FASA credit facility

is collateralized with a security interest in certain assets of the Company.

The FASA includes customary representations

The FASA includes customary representations and warranties

and default provisions for transactions of this type.

On March 25, 2022 we

entered into a Business Finance Agreement (the “BFA”) with BridgeBank a division of Western Alliance Bank

(“BridgeBank”) to establish the sale of of accounts receivable credit facility, whereby we may obtain short-term

financing by selling and assigning acceptable accounts receivables to BridgeBank.

Pursuant to the BFA, the outstanding principal

amount of advances made by BridgeBank at any time shall not exceed $ 8.5

BridgeBank reserves and withholds to 15 %

of the face amount of each account purchased in a reserve account.

As a result of entering into the BFA we have paid off and

terminated the Factoring and Security Agreement with Action Capital.

See notes 11 and 19.

The annual interest rate

with respect to the daily average balance of unpaid advances outstanding under the BFA (computed on a monthly basis) is equal to the

“Prime Rate” of Wells Fargo Bank N.A.

plus 1.5%, plus a monthly fee equal to 0.15% of the average outstanding balance .

BFA credit facility is collateralized with a senior security interest in certain assets of the Company.

The BFA includes customary representations

and warranties and default provisions for transactions of this type.

1 unchanged sentence

party notes payable, consisted of the following as of December 31:

Note payable –Marin

Note payable –Thomet

Note payable –Zicman

Note payable–Shareholder Convertible Note

Note payable - RWCC

OF NOTES PAYABLE, RELATED PARTIES

Note payable –Marin

Note payable –Thomet

Note payable – Shareholder Convertible

Total notes payable

Less current portion

Long-term portion

the years ended December 31, 2020 and December 31, 2019, the Company recorded interest expense in connection with these notes

in the amount of $15 thousand and $49 thousand, respectively.

current portion

the years ended December 31, 2021 and December 31, 2020, the Company recorded interest expense in connection with these notes in the

amount of $ 10 thousand

and $ 15 thousand,

respectively.

Payable -Marin

December 2017, we entered into a $660 thousand, 1.89% annual interest rate note payable (the “Marin Note”) with two

individuals from whom we previously acquired their company (in 2014).

The Marin Note is payable in 60 monthly principal payments

of $20 thousand beginning in October 2018.

Accrued interest payable as of December 31, 2020, was $56 thousand.

December 2017, we entered into a $ 660

thousand, 1.89 %

annual interest rate note payable (the “Marin Note”) with two individuals from whom we previously acquired their company

The Marin Note is payable in 60

monthly principal payments of $ 20

thousand beginning in October 2018.

Accrued interest

is payable at maturity.

Payable –

December 2017, we entered into a $750 thousand, zero percent annual interest rate note payable (the “Thomet Note”)

with an individual from whom we previously acquired his company (in 2014).

The Thomet Note is payable in 60 monthly principal

payments of $13 thousand beginning in October 2018.

Payable –

February 2018, we entered into a $180 thousand note payable Zicman.

In May 2020, the Company and Zicman entered into a conversion

agreement (the “Conversion Agreement”) whereby Zicman agreed to convert the principal outstanding on the note as of

May 2020, into OMNIQ common stock ($0.001 par value).

The total principal and interest outstanding as of May 2020 was $168 thousand

which was converted, in accordance with the Conversion Agreement, into 24,000 shares of OMNIQ common stock.

Note Payable –

Convertible Note

October 2018, we entered into a $700 thousand, 6% annual interest rate convertible note payable (the “Shareholder Convertible

Note”) with Walefar and Campbeltown (collectively the “Holders”), in connection with the HTS Image Processing,

Mr Shai Lustgarten, our Chief executive Officer and Director is the principal shareholder in Walefar.

a consultant and significant shareholder in OMNIQ, is the principal shareholder in Campbeltown.

Shareholder Convertible Note provided Holders a right , at any time on or after the loan origination date, to convert all or any

portion of the then outstanding and unpaid principal amount and interest (including any Default Interest) into fully paid and

non-assessable shares of OMNIQ’scommon stock.The number of conversion shares to be issued upon each conversion of the note

shall be determined by dividing the conversion amount by the applicable conversion price then in effect on the date specified

in the notice of conversion delivered us by the Holder.

The conversion rate was set at $4.72 per share.

April 2019, and in accordance with the Convertible Shareholder Note, the Holders converted $400 thousand ($200 thousand each)

of unpaid principal outstanding.

The Holders received 87,476 (42,373 each) common stock shares and 87,476 (42,373 each) in common

stock warrants.

September 2019, and in accordance with the terms of the Convertible Shareholder Note, the Holders, exercised the right to convert

$150 thousand ($75 thousand each) in unpaid principal balance into fully paid and non-assessable shares of our common stock at

a conversion price of $4.72.

Accordingly, the Company issued 31,780 common shares (15,890 shareseach) to the Holders.

We acquired the Note Payable –

RWCC (“RWCC Note”) with the acquisition of HTS.

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

The RWCC Note was historically

discounted using an effective interest rate of 5.0%.

As of December 3, 2020, this note is paid off.

The RWCC Note was 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 to the Chief Financial Officer.

payable as of December 31, 2021, was $ 63

Accrued interest is payable at

Payable – Thomet

December 2017, we entered into a $ 750

thousand, zero

percent annual interest rate note payable (the

“Thomet Note”) with an individual from whom we previously acquired his company (in 2014).

The Thomet Note is payable in 60

monthly principal payments of $ 13

thousand beginning in October 2018.

Payable – Shareholder Convertible Note

October 2018, we entered a $ 700

thousand, 6 %

annual interest rate convertible note payable (the “Shareholder Convertible Note”) with Walefar and Campbeltown (collectively

the “Holders”), in connection with the HTS Image Processing, Inc.

Mr Shai Lustgarten, our Chief executive Officer and Director

is the principal shareholder in Walefar.

Nissensohn, a consultant and significant shareholder in OMNIQ, is the principal

shareholder in Campbeltown.

The Shareholder Convertible Note was retired in 2021.

Shareholder Convertible Note provided Holders a right, at any time on or after the loan origination date, to convert all or any portion

of the then outstanding and unpaid principal amount and interest (including any Default Interest) into fully paid and non-assessable

shares of OMNIQ’s common stock.

The number of conversion shares to be issued upon each conversion of the note shall be determined

by dividing the conversion amount by the applicable conversion price then in effect on the date specified in the notice of conversion

delivered us by the Holder.

The conversion rate was set at $ 4.72

April 2019, and in accordance with the Convertible Shareholder Note, the Holders converted $ 400

thousand ($ 200

thousand each) of unpaid principal outstanding.

The Holders received 87,476

each) common stock shares and 87,476

each) in common stock warrants.

repayment of the notes payable, related parties as of December 31, 2021, is as follows for the years ending December 31, 2021:

OF FUTURE MATURITIES OF NOTES PAYABLE, RELATED PARTIES

12 – OTHER NOTES PAYABLE

notes payable consists of the following as of December 31, 2021:

Note Payable - Secured Supplier Note

OF OTHER NOTES PAYABLE

Note Payable - Secured Supplier

Notes Payable - other

2 unchanged sentences

maturities of notes payable are as follows for the years ending December 31, 2021:

Paycheck Protection Program Note Payable

In May 2020, we entered into a Loan Agreement with Zions Bank corporation, NA (“Zions”) whereby

we 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.

We recognized a gain on forgiveness of debt of $887,500;

included in early other (expenses) income on the consolidated

statements of operations.

Secured Note Payable

July 2016, we and a supplier entered into a secured promissory note (the “Secured Supplier Note”), in the principal

amount of $12.5 million and interest at 12% per annum.

The Secured Supplier Note was to be paid in six consecutive monthly

installments of a minimum principal amount of $250 thousand each principal and accrued interest, , with any remaining principal

and accrued interest due and payable on December 31, 2016.

November 2016 through March 2019, the Secured Supplier Note was amended six times (the “Amendments”), each time adjusting

the payment terms and maturity date.

April 2019, we entered into a seventh amendment extending the maturity date to July 31, 2019.

This amendment requires we make

three installment payments as follows:

a minimum payment in the amount $350 thousand plus all accrued interest on the principal due by May 15, 2019;

a minimum payment in the amount of $500 thousand plus all accrued interest on the principal through such payment date, shall

be due by June 15, 2019

a minimum payment in the amount of $750 thousand plus all accrued interest on the principal through such payment date, shall

be due by July 15, 2019;

remaining principal and interest due at maturity.

have made partial payments towards the required monthly installments under the terms of this amendment.

As has been the case with

each previous amendment, we are in continual negotiations with the holder of the Secured Supplier Note to extend the maturity

date and establish a new schedule of payments.

Payable - Other

In connection with the acquisition of Bar

Code Specialties, Inc.

(“BCS”), a California corporation, the Company assumed a related party note payable to the

former CTO of the RFID division of BCS.

The note is payable in equal monthly installments of $5 thousand beginning October 31,

2014 and ended October 2018.

The loan bears interest at 8.0% and is unsecured and subordinated to the Company’s bank debt.

On June 5, 2020, the Company reached an agreement with the noteholder to convert an aggregate of $261 thousand in principal, unpaid

interest, and penalties into an aggregate of 37,270 shares of Common Stock at a conversion price of $7.00 per share, which was

based on the closing price on June 3, 2020.

The balance on this loan at December 31, 2020 and December 31, 2019 was $0 and $137

thousand, respectively, all of which was classified as long-term

OF FUTURE MATURITIES OF NOTE PAYABLE

Supplier Note Payable

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

the principal amount of $ 12.5

million (the “Secured Promissory Note”).

The USD Note accrues interest at 18 %

per annum and is payable in six consecutive monthly installments of principal and accrued interest in a minimum principal amount of $ 250

thousand each, with any remaining principal and

accrued interest due and payable on December 31, 2016.

September 7, 2018, the Company entered into a Sixth Amendment to the Secured Promissory Note (the “Sixth Amendment”)

extending the maturity date to January 31, 2019.

The Sixth Amendment also increases the principal amount to $ 8.7

million, an increase of $ 6.8

million, by rolling the Company’s then

existing and outstanding accounts payable into the note by the previously mentioned amount of increase.

The Company will continue

to make monthly payments in the amount of $ 300

thousand for the first three monthly payments,

and also in the amount of $ 500

thousand for the last two monthly payments

prior to the note’s maturity.

April 30, 2019, the Company entered into a Seventh Amendment to the Secured Promissory Note (the “Seventh Amendment”)

extending the maturity date to July 31, 2019.

The Seventh Amendment also provides that the Company will continue to make monthly

installments of principal and accrued interest in a minimum principal amount of $ 350

thousand each.

The Company has made partial

payments towards the required monthly installments under the terms of the Seventh Amendment.

July 20, 2021, the Company entered into the Eighth Amendment to the Secured Promissory Note (the “Eighth Amendment”)

extending the maturity date to August 15, 2022 and reducing the interest rate from 18 %

The Eighth Amendment also provides that the Company will continue to make monthly installments of principal and accrued interest

at a minimum of $ 300

thousand each month.

As has been the case

with each previous amendment, the Company is in continual negotiations with the holder of the Secured Promissory Note to extend the

maturity date and establish a new schedule of payments.

On March 25 , 2022 the Company has paid

off the entire remaining balance owed to the supplier.

Notes Payable

On July 29, 2021 the Company entered into a long-term

loan from Leumi Bank totalling NIS 7 million, which at the time was approximately $ 2.16 million.

The note accrues interest at 4.7 % per

annum and is payable in 8 instalments of principal and interest over 4 years.

The note is secured by shares of Dangot Computers, Ltd.

On November 28, 2021 the Company entered into

another long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $ 1.1 million.

The note accrues

interest at 4.7 % per annum and is payable in 8 instalments of principal and interest over 4 years.

The note is secured by shares of Dangot

Computers, Ltd.

During the year ended

December 31, 2021, the Company entered into five lines of credit totalling NIS 17.5 million, as of December 31, 2021 the outstanding

balance was NIS 13.6 million, approximately $ 4.4 million.

On August 11, 2021, the Company purchased vehicles

using cash and financing of NIS 500 thousand, approximately $ 155 thousand, to be paid off in monthly interest and principal payments

over 5 years.

The loan accrues interest at 7.5 % per annum and is secured by the vehicles.

As of December 31, 2021, the remaining balance

was NIS 470 thousand, which was approximately $ 151 thousand.

On March 27, 2022 the Company entered into another

long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $ 1.1 million.

The note accrues interest

at 4.7 % per annum and is payable in 8 instalments of principal and interest over 4 years.

The note is secured by shares of Dangot Computers,

13 – OTHER LIABILITIES

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

of December 31, 2021 and 2020, other liabilities consisted of the following:

OF OTHER LIABILITIES

Other vendor payable

3 unchanged sentences

Less Current Portion

Total long term other liabilities

prior years, we purchased key man life insurance policies for some of our executives to insure against risk of loss of an executive.

As of December 31, 2020, we had $332 thousand in accrued obligations other liabilities related to the key man insurance

Total long term other

14 – COMMITMENTS AND CONTINGENCIES

maintain a contributory profit-sharing plan covering substantially all fulltime employees within the requirements of the

Employee Retirement Income Security Act of 1974 (“ERISA”).

In 2016, the Safe Harbor element was removed from the plan

and the employer may make a discretionary matching contribution equal to a uniform percentage or dollar amount of participants’

elective deferrals for each Plan Year.

In 2015, we were required to make a safe harbor non-elective contribution equal to 3 percent

of a participant’s compensation.

The plan also includes a 401(k) savings plan feature that allows substantially all employees

to make voluntary contributions and provides for discretionary matching contributions determined annually by the Board of Directors.

For the years ending December 31, 2020, and 2019, the Company elected to forgo the match.

of December 31, 2020, we had two Operating leases as follows:

space in Akron, Ohio, with monthly payments of $3 thousand and an incremental borrowing rate of 14.55%.

As of December 31,

2020, we had 29 months remaining on the lease.

vehicle with monthly payments of less than $1 thousand.

As of December 31, 2020, the Company had 13 months remaining on the

Effective January 1, 2019 we adopted Topic

Targeted Improvements.

As of December 31, 2020 we had two operating leases for office and assembly

space and no financing leases.

We elected the practical expedient ASU 2018-11, Leases (Topic 842):

Targeted Improvements

which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date.

Therefore, we recognized

and measured leases existing at January 1, 2019 (inception date).

In addition, the Company elected the optional practical expedient

permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing

leases upon adoption.

Lastly, the Company elected a short-term lease exception policy, permitting it to exclude the recognition

requirements of this standard from leases with initial terms of 12 months or less.

No impact was recorded to the income statement

or beginning retained earnings for Topic 842.

January 1, 2019, operating ROU assets and operating lease liabilities are recognized based on the present value of lease payments,

including annual rent increases, over the lease term at commencement date.

Operating leases in effect prior to January 1, 2019

were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019.

As none of our

leases included an implicit rate of return, we used our incremental borrowing rate based on lease term information available as

of the adoption date or lease commencement date in determining the present value of lease payments.

The impact of ASU No.

on our consolidated balance sheet beginning January 1, 2019 was through the recognition of ROU assets and lease liabilities for

operating leases.

Amounts recognized at January 1 and December 31, 2019 for operating leases are as follows:

January 1, 2019

December 31, 2019

Lease liability

January 1, 2019, we had three operating leases for office and/or warehouse space and one operating lease for a vehicle as follows:

were leasing approximately 7,000 sf of office space in Eugene, Oregon, with monthly payments of $4 thousand and an incremental

borrowing rate of 15.06%.

This lease was terminated in December 2019.

were leasing a small office space in Akron, Ohio, with monthly payments of $3 thousand and an incremental borrowing rate of

As of December 31, 2019, we had 41 months remaining on the lease with a lease liability of $96 thousand.

were leasing a small office and warehouse in Anaheim, California, with monthly payments of $2 thousand and an incremental

borrowing rate of 14.83%.

As of December 31, 2019, we had 12 months remaining on the lease with a lease liability of $28 thousand.

were leasing a vehicle with monthly payments of less than $1 thousand and an incremental borrowing rate of 14.83%.

As of December

31, 2019, the Company had 25 months remaining on the lease with a lease liability of $9 thousand.

maintain a contributory profit-sharing plan covering substantially all fulltime employees within the requirements of the Employee Retirement

Income Security Act of 1974 (“ERISA”).

In 2016, the Safe Harbor element was removed from the plan and the employer may make

a discretionary matching contribution equal to a uniform percentage or dollar amount of participants’ elective deferrals for each

In 2015, we were required to make a safe harbor non-elective contribution equal to 3 percent of a participant’s compensation.

The plan also includes a 401(k) savings plan feature that allows substantially all employees to make voluntary contributions and provides

for discretionary matching contributions determined annually by the Board of Directors.

For the year ending December 31, 2021, the company

has elected to match and 2020, the Company elected to forgo the match.

of December 31, 2021, we had 5 Operating leases as follows:

space in Akron, Ohio, with monthly payments of $ 3

thousand and an incremental borrowing rate

As of December 31, 2021, we had 17

months remaining on the lease.

space in Salt Lake City UT with monthly payments of $ 22

As of December 31, 2021, the Company had 56

remaining on the lease.

corporate offices are currently located at Yad harutzim 14 Tel-Aviv, Israel and serves as the company’s main operating location.

As of December 31, 2021, we had 35

months remaining on the lease.

Company lease additional office space for our finance

and service department at Yad harutzim 14 Tel-Aviv, Israel.

As of December 31, 2021, the Company had 24

months remaining on the lease.

Company also lease office and warehouse space for our products

and technical support staff in Hofman and Rival Street, Tel-Aviv, Israel.

As of December 31, 2021, the Company had 42

months remaining on the lease.

of December 31, 2021 we had two operating leases for office and assembly space and no financing leases.

We elected the practical expedient

ASU 2018-11, Leases (Topic 842):

Targeted Improvements which allows the Company to apply the transition provision for Topic 842

at the Company’s adoption date.

Therefore, we recognized and measured leases existing at January 1, 2019 (inception date).

the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward

the historical accounting treatment for existing leases upon adoption.

Lastly, the Company elected a short-term lease exception policy,

permitting it to exclude the recognition requirements of this standard from leases with initial terms of 12 months or less.

was recorded to the income statement or beginning retained earnings for Topic 842.

information related to our operating leases is as follows:

OF OTHER INFORMATION RELATED TO OPERATING LEASE

ROU asset - January 1, 2020

Effective foreign exchange rates

ROU asset - December 31, 2020

Lease liability - January 1, 2019

Lease liability - December 31, 2019

ROU asset - January 1, 2020

Effective foreign exchange rates

ROU asset - December 31, 2021

Lease liability - January 1, 2020

Effective foreign exchange rates

Lease liability - December 31, 2020

December 31, 2020

Lease liability

of December 31, 2020, our operating leases had a weighted average remaining lease term of 39.97 months and a weighted average

discount rate of 14.57%.

table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining

years to the lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2020:

Minimum lease payments

Increase (Decrease)

Effective foreign exchange rates

Lease liability - December 31, 2021

of December 31, 2021, our operating leases had a weighted average remaining lease term of 37

months and a weighted average discount rate

table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years

to the lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2021:

OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

lease payments

Less interest

2 unchanged sentences

Long term lease obligations

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 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 21, 2020.

The Company was named a defendant in

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

The 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.

STOCKHOLDERS’

of December 31, 2020 and 2019, there were 1,000,000 Series A preferred shares authorized and zero Series A preferred shares outstanding.

The board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 13 common shares.

of December 31, 2020 and 2019, there was one (1) preferred share authorized and zero preferred shares outstanding.

of December 31, 2020 and 2019, there were 5,000,000 Series C Preferred Shares (“Series C”) authorized with

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

The Series C shares have preferential rights above common shares

and the Series B Preferred Shares and is entitled to receive a quarterly dividend at a rate of $0.06 per share per annum and have

a liquidation preference of $1 per share.

Series C shares outstanding are convertible into common stock at the rate of 20 preferred

shares to one share of common stock.

As of December 31, 2020 and 2019, the accrued dividends on the Series C Preferred Stock was

$253 thousand and $344 thousand, respectively.

June 2020, certain holders of Series C Shares elected to convert $2.7 million or 2,683,500 Series C shares and $283 thousand in

accrued dividends in exchange for 190,365 OMNIQ common stock shares.

Series C Preferred Stock has a liquidation value and conversion price of $1.00 per share ($20.00 per 20 shares of preferred stock

which convert to one share of common stock) and automatically converts into Common Stock at $1.00 per share ($20.00 per 20 shares

of preferred stock which convert to one share of common stock) in the event that the Company’s common stock has a closing

price of $30 per share for 20 consecutive trading days.

August 2020, OMNIQ’

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.

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 approved by our stockholders at the September 2020, shareholders’

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

Company was named a defendant in a case involving a former employee who claims he is owed approximately $ 60

thousand in unpaid commissions.

The Company’s

intends to defend the case.

This case was filed in the Superior Court of the State of California, County of San Diego on October

company is not a party to any other pending material legal proceeding in which it is defending against any claims of material significance.

To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against

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.

15 – STOCKHOLDERS’ EQUITY

of December 31, 2021 and 2020, there were 2,000,000

Series A preferred shares authorized and

Series A preferred shares outstanding.

board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 13 common shares .

of December 31, 2021 and 2020, there was one ( 1 )

preferred share authorized and zero

preferred shares outstanding.

of December 31, 2021 and 2020, there were 3,000,000

Series C Preferred Shares (“Series

C”) authorized with 544,500

and 2,145,030

issued and outstanding, respectively.

C shares have preferential rights above common shares and the Series B Preferred Shares and is entitled to receive a quarterly dividend

at a rate of $ 0.06

per share per annum and have a liquidation preference

Series C shares outstanding are convertible

into common stock at the rate of 20 preferred shares to one share of common stock.

As of December 31, 2021 and 2020, the accrued dividends

on the Series C Preferred Stock was $ 126

thousand and $ 253

thousand, respectively.

2021, certain holders of Series C Shares elected to convert $ 1.6

million or 1,600,530

Series C shares and $ 194

thousand in accrued dividends in exchange for

OMNIQ common stock shares.

Series C Preferred Stock has a liquidation value and conversion price of $1.00 per share ($20.00 per 20 shares of preferred stock which

convert to one share of common stock) and automatically converts into Common Stock at $1.00 per share ($20.00 per 20 shares of preferred

stock which convert to one share of common stock) in the event that the Company’s common stock has a closing price of $30 per share

for 20 consecutive trading days .

October 2021, OMNIQ’ 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,

shares of the Company’s common stock, par

value $ 0.001

(the “Shares”), were set aside and

reserved for issuance.

The Plan approved by our stockholders at the December 2021, shareholders’ meeting.

shares were issued under the Plan in 2021.

August 2020, OMNIQ’ 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 the Company’s common stock, par value $ 0.001

(the “Shares”), were set aside and

reserved for issuance.

The Plan 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

shares were issued under the Plan in 2021.

December 2015, our Board of Directors approved the OMNIQ.

Employee Stock Purchase Plan (the “ESPP”).

For the years

ending December 31, 2020 and 2019, employees purchased 302 ($1 thousand) shares and 287 ($1 thousand) shares of commons stock.

the years ending December 31, 2020 and 2019, 216,750 and zero, respectively, in stock options and stock warrants were exercised

in exchange for 90,691 shares of OMNIQ common stock.

April 2020 and in conjunction with the Eyepax acquisition, we issued the former owner 80,000 share of OMNIQ common stock.

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

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

Employee Stock Purchase Plan (the “ESPP”).

For the years ending

December 31, 2021 and 2020, employees purchased 2,186

thousand) shares and 302

thousand) shares of commons stock.

February 15, 2021 the Company issued 25,000

shares to Orion 4, LLC as part of a consulting

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 $ 2

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 shareholder.

The shares were valued at less than $ 100

thousand including conversion penalties.

the years ending December 31, 2021 and 2020, 342,667

and 216,750 ,

respectively, in stock options and stock warrants were exercised in exchange for 279,096

shares of OMNIQ common stock.

April 2020 and in conjunction with the Eyepax acquisition, we issued the former owner 80,000

share of OMNIQ common stock.

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

shares of our 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 40,000 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

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.

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.

November 11, 2019, we implemented a one-for-20 reverse stock split of the Company’s common stock.

The par value of common

stock and the number of authorized shares were not adjusted as a result of the reverse stock 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 this

reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in

September 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the

right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common

stock at a conversion price of $0.236.

Accordingly, we issued 317,796 shares to each of Walefar and Campbeltown.

September 2019, we entered into a letter agreement with Shai Lustgarten, the Company’s Chief Executive Officer, pursuant

to which we and Mr.

Lustgarten agreed to extend the term of Mr.

Lustgarten’s employment agreement for an additional two

As consideration and in light of the Company’s achievements under the leadership of Mr.

Lustgarten, the Company,

pursuant to its 2018 Equity Incentive Plan, issued to Mr.

Lustgarten 50,000 shares of the OMNIQ common stock valued at $250 thousand.

September 2019, we entered into a letter agreement with Mr.

Nissensohn and/or an entity under his control, a consultant

to the Company and principal stockholder, pursuant to which they agreed to extend the term of Mr.

Nissensohn’s and/or an

entity under his control’s consulting agreement for an additional two (2) years.

As consideration and in light of Mr.

Nissensohn’s

and/or an entity under his control’s past consulting services which we believe were essential to its recent achievements,

we, pursuant to the 2018 Equity Incentive Plan, issued to Mr.

Nissensohn and/or an entity under his control 27,500 shares of the

Company’s common stock, valued at $138 thousand.

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

investors (the “Purchasers”).

Pursuant to the Securities Purchase Agreement, on April 9, 2019 (the “Closing

Date”), 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, before deducting placement agent fees and offering expenses (the “Offering”).

The individual Unit purchase price was $6.00.

Each Unit is 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.

Both Shai Lustgarten, the

Company’s Chief Executive Officer, and Carlos J.

Nissensohn, a consultant to and principal stockholder of the Company, participated

in the Offering by converting $200 thousand each 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 5, 2018.

Shai Lustgarten,

our Chief Executive Officer, options to purchase 40,000

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.

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 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

Nissensohn, which have an exercise price of $ 4.84

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 )

and Stock Options

connection with the April 2019 Securities Purchase Agreement previously described, we issued warrants to

purchase 891,667 shares of our common stock 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.

The warrants were valued at $2.9 million.

Also during 2019, we

issued options to purchase 128,000 valued at $564 thousand.

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/warrants award on the date of grant were:

connection with the July 2021 Securities Purchase Agreement previously described, we issued warrants to purchase 171,429

shares of our common stock 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.

The warrants were valued at $ 1.3

and warrants are 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.

valuation assumptions used to determine the fair value of each warrants awarded in 2021:

expected stock price volatility 151.0 %

term in years 4.0-5.5;

expected term in years 5 ;

and risk-free interest rate 0.41 %.

valuation assumptions used to determine the fair value of each option/warrants awarded in 2020:

expected stock price volatility 156.0 %

expected term in years 4.0 - 5.5 ;

and risk-free interest rate 1.40 %

additional options were issued in 2021.

For warrants exercised during the year ended December

31, 2021, the difference between the fair value of the Common Stock issued and the respective exercise price was $ 683 thousand.

December 31, 2021, the intrinsic value for vested warrants was $ 8 million and $ 6 million, respectively.

following table summarizes information about warrants granted during the years ended December 31:

OF WARRANTS ACTIVITY

Exercise Price

8 unchanged sentences

warrants as of December 31, 2021 are as follows:

OF OUTSTANDING WARRANTS

Weighted Average

residual life

2.20 to 14.00

outstanding have the following expiry date and exercise prices as of the year ended December 31, 2020:

June 26, 2020

October 10, 2020

December 30, 2020

February 02, 2021

August 02, 2021

October 10, 2021

February 27, 2022

October 14, 2023

October 06, 2024

September 01, 2025

June 04, 2026

December 04, 2027

have a stock option plan whereby the Board of Directors, may grant to directors, officers, employees, or consultants of the Company

options to acquire common shares.

The Board of Directors of the Company has the authority to determine the terms, limits, restrictions

and conditions of the grant of options, to interpret the plan and make all decisions relating thereto.

The plan was adopted by

the Company’s Board of Directors on November 17, 2014 in order to provide an inducement and serve as a long-term

incentive program.

The maximum number of common shares that may be reserved for issuance was set at 500,000.

option exercise price is established by the Board of Directors and may not be lower than the market price of the common shares

at the time of grant.

The options may be exercised during the option period determined by the Board of Directors, which may vary,

but will not exceed ten years from the date of the grant.

There are 500,000 of the Company’s common shares which may be

issued pursuant to the exercise of share options granted under the Plan..

Options - The following table summarizes information about stock options granted during the years ended December 31, 2020

outstanding have the following expiry date and exercise prices as of the years ended December 31, 2021:

OF WARRANTS OUTSTANDING, EXPIRY DATE AND EXERCISE PRICES

have a stock option plan whereby the Board of Directors, may grant to directors, officers, employees, or consultants of the Company options

to acquire common shares.

The Board of Directors of the Company has the authority to determine the terms, limits, restrictions and conditions

of the grant of options, to interpret the plan, and make all decisions relating thereto.

The plan was adopted by the Company’s

Board of Directors on November 17, 2014 in order to provide an inducement and serve as a long-term incentive program.

The maximum number

of common shares that may be reserved for issuance was set at 500,000 .

option exercise price is established by the Board of Directors and may not be lower than the market price of the common shares at the

time of grant.

The options may be exercised during the option period determined by the Board of Directors, which may vary, but will not

exceed ten years from the date of the grant.

There are 500,000

of the Company’s common shares which may

be issued pursuant to the exercise of share options granted under the Plan.

For options exercised during the year ended December

31, 2021, the difference between the fair value of the Common Stock issued and the respective exercise price was $ 1.5 million.

December 31, 2021, the intrinsic value for vested stock options was $ 6.6 million and $ 5 million, respectively.

Options - The following table summarizes information about stock options granted during the years ended December 31, 2021 and 2020:

OF STOCK OPTIONS GRANTED

Exercise Price

8 unchanged sentences

stock options as of December 31, 2021, are as follows:

OF OUTSTANDING STOCK OPTIONS

residual life

3 unchanged sentences

options outstanding at the end of the year have the following expiry date and exercise prices:

August 02, 2021

February 17, 2022

February 28, 2023

March 05, 2023

July 31, 2023

October 31, 2023

November 30, 2023

November 20, 2024

April 20, 2025

September 30, 2030

OF STOCK OPTIONS, EXPIRY DATE AND EXERCISE PRICES

recorded stock compensation expense relating to the vesting of stock options and warrants as follows for the years ended December 31,

2021 and 2020;

OF STOCK COMPENSATION EXPENSE

Stock compensation

2 unchanged sentences

February 2020 we amended the consulting agreement with Mr.

Nissensohn, a principal shareholder of the Company and a

family member of a Director of the Company.

Nissensohn, a principal shareholder of the Company and a family

member of a Director and Officer of the Company.

The terms and condition of the contract are as follows:

term with 90 day termination notice by the Company

monthly fee of $30 thousand.

monthly fee of $ 30

we procure debt financing during the term of Mr.

Nissensohn’s agreement, without any equity component, Mr.

shall be entitled to 3% of the gross funds raised, however if we are required to pay a success fee to another external entity,

Nissensohn’s agreement, without any equity component, Mr.

Nissensohn shall

be entitled to 3% of the gross funds raised, however if we are required to pay a success fee to another external entity, then Mr.

Nissensohn shall be entitled to only 2% of the gross funds raised .

addition to the above, in the event of an equity financing resulting in gross proceeds of at least $3 million to us within

24 months of the date the contract, Mr.

Nissensohn shall further be entitled to certain warrants to be granted by us which

upon their exercise pursuant to their terms, Mr.

Nissensohn shall be entitled to receive OMNIQ shares which represent 3% of

the OMNIQ issued share capital immediately prior to the consummation of such investment.

The warrants will carry an exercise

price per warrant/share representing 100% of the closing price per share as closed in the equity financing.

This section and

the issue of the warrant by OMNIQ are subject to the approval of the Board of Directors of OMNIQ.

However, if the Board does

not approve the issuance of warrants;

Nissensohn will be entitled to a fee with the equivalent value based on a Black

Scholes valuation

addition to the above, in the event of an equity financing resulting in gross proceeds of at least $ 3

million to us within 24 months of the date

the contract, Mr.

Nissensohn shall further be entitled to certain warrants to be granted by us which upon their exercise pursuant

to their terms, Mr.

Nissensohn shall be entitled to receive OMNIQ shares which represent 3 %

of the OMNIQ issued share capital immediately prior to the consummation of such investment.

The warrants will carry an exercise price

per warrant/share representing 100 %

of the closing price per share as closed in the equity financing.

This section and the issue of the warrant by OMNIQ are subject

to the approval of the Board of Directors of OMNIQ.

However, if the Board does not approve the issuance of warrants;

will be entitled to a fee with the equivalent value based on a Black Scholes valuation

addition to the above, Mr.

Nissensohn will be entitled to a $80 thousand one-time payment which shall be paid on the

1 st day that the OMNIQ shares become traded on the NASDAQ or NYSE Stock Market within 24 months of the date of

Nissensohn will be entitled to a $ 80

thousand one-time payment which shall be

paid on the 1 st day that the OMNIQ shares become traded on the NASDAQ or NYSE Stock Market within 24 months of the date

of the contract

addition to the aforementioned, in the event that we close any M&A transaction with a third party target, Mr.

shall be entitled to a success fee in the amount equal to 5% of the total transaction price, in any combination of

cash and shares that will be determined by OMNIQ

related party transactions are discussed in Notes 10.

the year ended December 31, 2020, the Company has $5 thousand of current income tax provision (US State & Local and

Foreign) and no deferred income tax provision.

Nissensohn shall

be entitled to a success fee in the amount equal to 5 %

of the total transaction price, in any combination of cash and shares that will be determined by OMNIQ

related party transactions are discussed in Note 11.

17 – GEOGRAPHIC DATA

the years ended December 31, 2021 and 2020, two customers accounted for 23 %

and one customer accounted for 37.2 %,

respectively, of the Company’s revenues.

about Geographic Areas

by geography are based on the billing addresses of our customers.

The following tables set forth revenues by geographic area (in thousands):

Ended December 31,

United States

Rest of the world

Total revenues

Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in the countries in

which the Company operates.

Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of

export duties, quotas and embargoes;

domestic and international customs and tariffs;

changing taxation policies;

foreign exchange

restrictions;

and political conditions and governmental regulations.

18 – INCOME TAX

the year ended December 31, 2021, the Company has $ 321

thousand of current income tax provision

(US State & Local and Foreign) and $ 165

deferred income tax benefit.

tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows as of December

OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets

2 unchanged sentences

Stock options

Foreign deferred tax assets

Net operating loss

3 unchanged sentences

Deferred tax liabilities

Amortization of intangible assets and depreciation

Amortization of intangible

assets and depreciation

Total deferred tax liabilities

1 unchanged sentence

of net deferred tax assets, including a valuation allowance, are as follows as of December 31:

OF DEFERRED TAX ASSETS AND VALUATION ALLOWANCES

Deferred tax assets

1 unchanged sentence

Total deferred tax assets

valuation allowance for deferred tax assets as of December 31, 2020 and 2019 was $8.3 million and $5.4 million, respectively.

In assessing the recovery of the deferred tax assets, management considers whether it is more likely

than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets

is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible.

Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning

strategies in making this assessment.

Management has recorded a 100% Valuation Allowance, against its Net Deferred Tax Assets,

since Management believes it is more likely than not that it will not be realized at the date of this statement.

The Company will

continue to monitor the potential utilization of this asset.

Should factors and evidence change to aid in this assessment, a potential

adjustment to the valuation allowance in future periods may occur.

The Company records any penalties and interest as a component

of operating expenses.

valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $ 8.7

million and $ 8.3

million, respectively.

In assessing the recovery

of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets

will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the

periods in which those temporary differences become deductible.

Management considers the scheduled reversals of future deferred tax liabilities,

projected future taxable income, and tax planning strategies in making this assessment.

Management has recorded a 100% Valuation Allowance,

against its U.S.

Net Deferred Tax Assets, since Management believes it is more likely than not that it will not be realized at

the date of this statement.

The Company will continue to monitor the potential utilization of this asset.

Should factors and evidence

change to aid in this assessment, a potential adjustment to the valuation allowance in future periods may occur.

The Company records

any penalties and interest as a component of operating expenses.

reconciliation between statutory rate and effective rate is as follows as of December 31, 2021 and 2020:

OF RECONCILIATION OF STATUTORY RATE AND EFFECTIVE TAX RATE

Federal statutory tax rate

5 unchanged sentences

Effective tax rate

Company reported no uncertain tax liability as of December 31, 2020 and expects no significant change to the uncertain

tax liability over the next twelve months.

The Company’s 2014, 2015, 2016, 2017, and 2018 federal and state income tax returns

are open for examination by the applicable governmental authorities.

of December 31, 2019, the Company had a net operating loss (NOL) carryforward of approximately $22.1 million.

The NOL carryforward

begins to expire in 2024.

Under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC Section 382”),

a corporation that undergoes an “ownership change”

is subject to limitations on its use of pre-change NOL carryforwards

Company reported no uncertain tax liability as of December 31, 2021 and expects no significant change to the uncertain tax liability

over the next twelve months.

The Company’s 2015, 2016, 2017, 2018, 2019, and 2020 federal and state income tax returns are

open for examination by the applicable governmental authorities.

of December 31, 2021, the Company had a net operating loss (NOL) carryforward of approximately $ 34

NOL carryforward begins to expire in 2027.

Under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC Section

382”), a corporation that undergoes an “ownership change” is subject to limitations on its use of pre-change NOL carryforwards

to offset future taxable income.

Within the meaning of IRC Section 382, an “ownership change”

occurs when the aggregate

stock ownership of certain stockholders (generally 5% shareholders, applying certain look-through rules and aggregation rules

which combine unrelated shareholders that do not individually own 5% or more of the corporation’s stock into one or more

“public groups”

that may be treated as 5-percent shareholder) increases by more than 50 percentage points over such

stockholders’

lowest percentage ownership during the testing period (generally three years).

In general, the annual use

limitation equals the aggregate value of common stock at the time of the ownership change multiplied by a specified tax-exempt

interest rate.

The Company has not completed a study as to whether there is a 382 limitation on its NOLs that will limit or possibly

eliminate the use of its NOLs in the future.

Company’s Management has recorded a 100% valuation allowance on the entire

NOL as it believes that it is more likely than not that the deferred tax asset associated with the NOLs will not be realized regardless

of whether or not an “ownership change”

has occurred.

Within the meaning of IRC Section 382, an “ownership change” occurs when the aggregate stock

ownership of certain stockholders (generally 5% shareholders, applying certain look-through rules and aggregation rules which combine

unrelated shareholders that do not individually own 5% or more of the corporation’s stock into one or more “public groups”

that may be treated as 5-percent shareholder) increases by more than 50 percentage points over such stockholders’ lowest percentage

ownership during the testing period (generally three years) .

In general, the annual use limitation equals the aggregate value of common stock at the time of the ownership change multiplied by a

specified tax-exempt interest rate.

The Company has not completed a study as to whether there is a 382 limitation on its NOLs that will

limit or possibly eliminate the use of its NOLs in the future.

Company’s Management has recorded a 100% valuation allowance on

the entire NOL as it believes that it is more likely than not that the deferred tax asset associated with the NOLs will not be realized

regardless of whether or not an “ownership change” has occurred.

19 – SUBSEQUENT EVENTS

accordance with ASC 855, “Subsequent Events”, the Company has evaluated all subsequent events through the date of

On March 25 , 2022 we entered into

a Business Finance Agreement (“BFA”) with BridgeBank a division of Western Alliance Bank.

In accordance with the BFA we’ve

terminated our lending relationship with Action Capital and paid of the remaining balance on a supplier note payable.

See notes 10 and 12.

On March 27, 2022 we entered into another

long-term loan from Leumi Bank totalling NIS 3.5

million, which at the time was approximately $ 1.1

The note accrues interest at 4.7 %

per annum and is payable in 8

instalments of principal and interest over 4

accordance with ASC 855, “Subsequent Events”, the Company has evaluated all subsequent events through the date of this filing.

No other significant events have occurred besides the events disclosed in the Notes to the Financial Statements.

INDEX—we will update the exhibit index

Form of Certificate of Amendment to the Certificate of Incorporation, as amended, dated November 18, 2019 incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 18, 2019.

Amendment to Certificate of Designation of Series C Preferred Stock on June 17, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2016.

Form of Certificate of Amendment to the Certificate of Incorporation, as amended, of OMNIQ Corp., dated September 30, 2020, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 2, 2020.

$12,492,136.51 Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

INDEX—we will update the exhibit index

of Certificate of Amendment to the Certificate of Incorporation, as amended, dated November 18, 2019 incorporated by reference to

Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 18, 2019.

to Certificate of Designation of Series C Preferred Stock on June 17, 2016, incorporated by reference to Exhibit 3.1 to the Company’s

Current Report on Form 8-K, filed with the SEC on June 21, 2016.

of Certificate of Amendment to the Certificate of Incorporation, as amended, of OMNIQ Corp., dated September 30, 2020, incorporated

by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 2, 2020.

$12,492,136.51

Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc.,

Quest Exchange Ltd.

and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference

to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

of Securities

$483,173.60 CAD Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

Form of Warrant, incorporated by referenced to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2019.

Form of Placement Agent Warrant, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2019.

Factoring and Security Agreement, by and among Quest Solution, Inc., Quest Marketing, Inc., Bar Code Specialties, Inc., and Action Capital Corporation, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016.

Pledge and Security Agreement, by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and ScanSource, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016 .

Security Agreement, by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and ScanSource, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016.

Warrant issued to David and Kathy Marin dated February 28, 2018, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed with the SEC on March 1, 2018.

Movable Hypothec and General Security Agreement by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and ScanSource, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

Universal Movable Hypothec and General Security Agreement by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd.

and ScanSource, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

Separation Agreement and General Release by and between Quest Solution, Inc.

and Jason Griffith, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 26, 2016.

Separation Agreement and General Release by and between Quest Solution, Inc.

and Scot Ross, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 4, 2016.

Redemption Agreement by and among Quest Solution, Inc., Danis Kurdi and 3587967 Canada, Inc.

dated November 30, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 6, 2016 .

Exchange and Transfer Agreement, by and among Viascan Group.

Inc., Quest Solution, Inc.

and Quest Exchange Ltd.

dated November 30, 2016, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 6, 2016.

Employment Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.

Modification Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.

Resignation Agreement by and between the Company and Tom Miller dated July 7, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 12, 2017.

Agreement by and between the Company and Carlos J Nissensohn dated August 2, 2017 incorporated by reference to Exhibit

10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 4, 2017.

Consulting Agreement by and between the Company and YES-IF dated September 8, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2017.

Termination Agreement by and between the Company and Joey Trombino dated September 29, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2017.

Employment Agreement by and between the Company and Benjamin Kemper dated October 2, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2017.

Settlement Agreement dated February 28, 2018 by and between the Company and David and Kathy Marin (the “Marin Settlement Agreement I”), incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.

Settlement Agreement dated February 28, 2018 by and between the Company and Kurt Thomet, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018 .

Settlement Agreement dated February 28, 2018 by and between the Company and George Zicman., incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.

Voting Agreement dated February 28, 2018 by and between the Company and David and Kathy Marin, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.

Voting Agreement dated February 28, 2018 by and between the Company and Kurt Thomet, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018 .

Voting Agreement dated February 28, 2018 by and between the Company and George Zicman, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.

Employment Agreement by and between the Company and David Marin dated February 28, 2018.

2018 Equity Incentive Plan incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on March 12, 2018.

Settlement Agreement with Jason Griffith, dated June 7, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2018.

Amendment to Security Agreement with ScanSource, Inc.

dated September 7, 2018, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.

Amendment to Pledge and Security Agreement with ScanSource, Inc.

dated September 7, 2018, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.

Prepayment Agreement with ScanSource, Inc.

dated September 7, 2018, incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.

Amendment #9 to Trade Credit Extension Letter with ScanSource, Inc.

dated September 7, 2018, incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.

Amendment #6 to Secured Promissory Note with ScanSource, Inc.

dated September 7, 2018 (the “Modified Note”), incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.

HTS Purchase Agreement, dated October 5, 2018, by and between the Company, Walefar Investments, Ltd.

and Campbeltown Consulting, Ltd.

incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2018.

Convertible Promissory Note issued to Walefar Investments, Ltd.

and Campbeltown Consulting, Ltd., incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2018.

Form of Securities Purchase Agreement, dated April 4, 2019, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 9, 2019.

Letter Agreement with Shai Lustgarten, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.

Letter Agreement with Carlos J.

Nissensohn, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.

Neev Nissenson Employment Agreement, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.

Asset Purchase Agreement, dated February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.

Shai Lustgarten Employment Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.

Consulting Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.

Asset Purchase Agreement on February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.

Employment Agreement with Shai Lustgarten on September, 2019, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.

Consulting Agreement with Carlos J.

Nissensohn on September, 2019, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.

2020 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 4, 2020.

CAD Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada

Inc., Quest Exchange Ltd.

and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference

to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.

of Warrant, incorporated by referenced to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April

of Placement Agent Warrant, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with

the SEC on April 9, 2019.

Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the

Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.

Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the

Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.

Agreement by and between the Company and Carlos J Nissensohn dated August 2, 2017 incorporated by reference to Exhibit 10.1 to the

Company’s Current Report on Form 8-K, filed with the SEC on August 4, 2017.

Agreement by and between the Company and YES-IF dated September 8, 2017, incorporated by reference to Exhibit 10.1 to the Company’s

Current Report on Form 8-K filed with the SEC on September 8, 2017.

Agreement by and between the Company and Benjamin Kemper dated October 2, 2017, incorporated by reference to Exhibit 10.3 to the

Company’s Current Report on Form 8-K filed with the SEC on October 5, 2017.

Agreement by and between the Company and David Marin dated February 28, 2018.

2018 Equity Incentive Plan incorporated by reference

to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on March 12, 2018.

Nissenson Employment Agreement, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed

with the SEC on September 9, 2019.

Purchase Agreement, dated February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form

8-K filed with the SEC on March 4, 2020.

Lustgarten Employment Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.2 to the Company’s

Current Report on Form 8-K filed with the SEC on March 4, 2020.

Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form

8-K filed with the SEC on March 4, 2020.

Purchase Agreement on February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form

8-K filed with the SEC on March 4, 2020.

Agreement with Shai Lustgarten on September, 2019, incorporated by reference to Exhibit 10.1 to the Company’s Current Report

on Form 8-K filed with the SEC on September 9, 2019.

Agreement with Carlos J.

Nissensohn on September, 2019, incorporated by reference to Exhibit 10.2 to the Company’s Current

Report on Form 8-K filed with the SEC on September 9, 2019.

Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the

SEC on September 4, 2020.

of the Registrant

6 unchanged sentences

of our Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.

Section 1350)

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith.

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 9A. Controls and Procedures