OMNIQ Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS OMNIQ CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ( UNAUDITED ) (In thousands, except share and per share data) As of September 30, 2022 December 31, 2021 ( UNAUDITED ) ASSETS Current assets Cash and cash equivalents $ 3,791 $ 7,085 Accounts receivable, net 26,583 27,123 Inventory 8,038 6,955 Prepaid expenses 2,311 1,987 Other current assets 13 9 Total current assets 40,736 43,159 Property and equipment, net of accumulated depreciation of $ 1,397 and $ 2,203 respectively 940 1,127 Goodwill 16,519 16,453 Trade name, net of accumulated amortization of $ 4,309 and $ 3,863 , respectively 1,975 2,421 Customer relationships, net of accumulated amortization of $ 10,487 and $ 9,660 , respectively 5,242 6,069 Other intangibles, net of accumulated amortization of $ 1,485 and $ 1,457 , respectively 723 865 Right of use lease asset 2,582 3,556 Other assets 1,628 1,431 Total assets $ 70,345 $ 75,081 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities $ 50,874 $ 45,553 Line of credit 7,533 5,951 Accrued payroll and sales tax 2,860 2,658 Notes payable, related parties – current portion 390 390 Notes payable – current portion 7,995 7,521 Lease liability – current portion 1,000 1,341 Other current liabilities 2,558 2,683 Total current liabilities 73,210 66,097 Long term liabilities Notes payable, related party, less current portion - 293 Accrued interest and accrued liabilities, related party 71 63 Notes payable, less current portion 2,855 2,646 Lease liability 1,628 2,266 Other long term liabilities 145 1,418 Total liabilities 77,909 72,783 Stockholders’ equity (deficit) Series A Preferred stock; $ 0.001 par value; 2,000,000 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; 3,000,000 shares designated, 544,500 shares issued and outstanding, respectively 1 1 Preferred Stock Value 1 1 Common stock; $ 0.001 par value; 15,000,000 shares authorized; 7,612,744 and 7,448,597 shares issued and outstanding, respectively. 8 20 Additional paid-in capital 72,568 70,606 Accumulated (deficit) ( 80,401 ) ( 70,571 ) Cumulative Translation Adjustment 260 ( 154 ) Total OmniQ stockholders’ deficit ( 7,564 ) ( 98 ) Non controlling interest - 2,396 TOTAL EQUITY (DEFICIT) ( 7,564 ) 2,298 Total liabilities and equity (deficit) $ 70,345 $ 75,081 The accompanying unaudited notes should be read on conjunction with these unaudited condensed consolidated financial statements. F- 1 OMNIQ CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) For the three months For the nine months ending September 30, ending September 30, (In thousands, except share and per share data) 2022 2021 2022 2021 Revenues Total Revenues $ 27,008 $ 20,513 $ 77,539 $ 53,383 Cost of goods sold Cost of goods sold 21,032 15,842 59,449 42,778 Gross profit 5,976 4,671 18,090 10,605 Operating expenses Research & Development 445 474 1,436 1,437 Selling, general and administrative 7,624 6,801 21,173 15,348 Depreciation 91 82 241 167 Amortization 474 1,528 1,326 2,575 Total operating expenses 8,634 8,885 24,176 19,527 Loss from operations ( 2,658 ) ( 4,214 ) ( 6,086 ) ( 8,922 ) Other income (expenses): Interest expense ( 880 ) ( 587 ) ( 2,569 ) ( 1,890 ) Other (expenses) income ( 217 ) ( 158 ) ( 870 ) 2 Total other expenses ( 1,097 ) ( 745 ) ( 3,439 ) ( 1,888 ) Net Loss Before Income Taxes ( 3,755 ) ( 4,959 ) ( 9,525 ) ( 10,810 ) Provision for Income Taxes Current ( 55 ) ( 117 ) ( 41 ) ( 119 ) Total Provision for Income Taxes ( 55 ) ( 117 ) ( 41 ) ( 119 ) Net Loss $ ( 3,810 ) $ ( 5,076 ) $ ( 9,566 ) $ ( 10,929 ) Net income attributable to noncontrolling interest - 166 67 166 Net Loss attributable to OmniQ Corp $ ( 3,810 ) $ ( 5,242 ) $ ( 9,633 ) $ ( 11,095 ) Net Loss $ ( 3,810 ) $ ( 5,076 ) $ ( 9,566 ) $ ( 10,929 ) Foreign currency translation adjustment 241 ( 58 ) 260 ( 24 ) Comprehensive loss ( 3,569 ) ( 5,134 ) ( 9,306 ) ( 10,953 ) Reconciliation of net loss to net loss attributable to common shareholders Net loss ( 3,810 ) ( 5,076 ) ( 9,566 ) ( 10,929 ) Less: Dividends attributable to non-common stockholders’ of OmniQ Corp ( 149 ) ( 12 ) ( 197 ) ( 57 ) Net loss less non-common stockholder dividends $ ( 3,959 ) $ ( 5,088 ) $ ( 9,763 ) $ ( 10,986 ) Net income after non-common stockholder dividends attributable to noncontrolling interest - 166 - 166 Net loss attributable to common stockholders of OmniQ Corp ( 3,959 ) ( 5,242 ) ( 9,763 ) ( 11,095 ) Net (loss) per share - basic attributable to common stockerholders’ of OmniQ Corp $ ( 0.52 ) $ ( 0.73 ) $ ( 1.29 ) $ ( 1.86 ) Weighted average number of common shares outstanding - basic 7,578,351 7,224,958 7,545,190 5,971,440 The accompanying unaudited notes should be read in conjunction with these unaudited condensed consolidated financial statements. F- 2 OMNIQ CORP. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) Series C Additional Non Other Total Stockholders’ Preferred Stock Common Stock Paid-in Accumulated Controlling Comprehensive Equity (In thousands) Shares Amount Shares Amount Capital Deficit Interest Income (Loss) (Deficit) Balance, December 31, 2020 2,145 $ 2 4,685 $ 5 51,842 $ ( 56,726 ) - $ ( 166 ) $ ( 5,043 ) Dividend on class C shares - - - - - ( 31 ) - - ( 31 ) ESPP stock issuance - - - - 1 - - - 1 ESPP stock issuance, shares Stock-based compensation – options, warrants, issuances - - - - 786 - - - 786 Stock and warrant issued for services - - 25 - 188 - - - 188 Exercise of stock options and warrants - - 6 - 2 - - - 2 Cumulative translation adjustment - - - - - - - 105 105 Other - - - - - ( 4 ) - - ( 4 ) Net (loss) income - - - - - ( 3,343 ) - - ( 3,343 ) Balance, March 31, 2021 2,145 2 4,716 5 52,819 ( 60,104 ) - ( 61 ) ( 7,339 ) Dividend on class C shares - - - - - ( 14 ) - - ( 14 ) ESPP stock issuance - - 1 - 4 - - - 4 Stock-based compensation – options, warrants, issuances - - - - 786 - - - 786 Exercise of stock options and warrants - - 240 - 304 - - - 304 Cumulative translation adjustment - - - - - - - ( 71 ) ( 71 ) Conversion of equity ( 1,400 ) ( 1 ) 70 - 1 - - - - Conversion of debt - - 25 - 203 - - - 203 Net (loss) income - - - - - ( 2,510 ) - - ( 2,510 ) Balance, June 30, 2021 745 $ 1 5,052 $ 5 $ 54,117 $ ( 62,628 ) $ - $ ( 132 ) $ ( 8,637 ) Dividend on class C shares - - - - - ( 12 ) - - ( 12 ) ESPP stock issuance - - 1 - 10 - - - 10 Stock-based compensation – options, warrants, issuances - - - 653 - - - 653 Exercise of stock options and warrants - - 33 - 132 - - - 132 Stock and warrant issuances, net of issuance costs - - 2,143 15 13,280 - - - 13,295 Stock and warrant issuance for acquisition - - 220 - 2,084 - - - 2,084 Cumulative translation adjustment - - - - - 59 ( 58 ) 1 Dangot acquisition - - - - - - 6,508 - 6,508 Post acquisition adjustment - - - - - ( 1 ) ( 324 ) - ( 325 ) Net (loss) income - - - - - ( 5,242 ) 166 - ( 5,076 ) Balance, September 30, 2021 745 $ 1 7,449 $ 20 $ 70,276 $ ( 67,883 ) $ 6,409 $ ( 190 ) $ 8,633 Balance, December 31, 2021 544 $ 1 7,459 20 70,606 ( 70,571 ) 2,396 ( 154 ) 2,298 Dividends - - - - - ( 48 ) - - ( 48 ) ESPP stock issuance - 2 - 8 - - - 8 Stock and warrant issued for services - - - - 298 - - - 298 Stock-based compensation – options, warrants, issuances - - - - 460 - - - 460 Exercise of stock options and warrants - - 99 - 41 - - - 41 Cumulative translation adjustment - - - - - - ( 20 ) ( 10 ) ( 30 ) Net (loss) income - - - - - ( 2,636 ) 67 - ( 2,569 ) Balance, March 31, 2022 544 $ 1 7,560 $ 20 $ 71,413 $ ( 73,255 ) $ 2,443 $ ( 164 ) $ 458 Dividends - - - - - ( 141 ) - - ( 141 ) ESPP stock issuance - - 1 - 10 - - - 10 Noncontrolling interests - distributions and other - - - - ( 668 ) - ( 2,443 ) - ( 3,111 ) Exercise of stock options and warrants - - 18 - 87 - - - 87 Stock-based compensation – options, warrants, issuances - - - - 743 - - - 743 - Cumulative translation adjustment - - - - - - 241 241 Net (loss) income - ( 3,186 ) - - ( 3,186 ) Balance, June 30, 2022 544 $ 1 7,579 $ 20 $ 71,585 $ ( 76,582 ) $ - $ 77 $ ( 4,899 ) Dividends - - - - - ( 8 ) - - ( 8 ) ESPP stock issuance - - 2 - 8 - - - 8 Other - - - ( 12 ) 13 ( 1 ) - - - Exercise of stock options and warrants - - 11 - 19 - - - 19 Stock-based compensation – options, warrants, issuances - - - - 834 - - - 834 Stock and warrants issued for services - - 20 - 109 - - - 109 Cumulative translation adjustment - - - - - - - 183 183 Net (loss) income - - - - - ( 3,810 ) - - ( 3,810 ) Balance, September 30, 2022 544 $ 1 7,612 $ 8 $ 72,568 $ ( 80,401 ) $ - $ 260 $ ( 7,564 ) The accompanying unaudited notes should be read in conjunction with these condensed unaudited consolidated financial statements. F- 3 OMNIQ CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, (In thousands) 2022 2021 Cash flows from operations Net loss $ ( 9,566 ) $ ( 10,929 ) Adjustments to reconcile net loss to net cash provided by operating activities: Loss on disposal of PP&E 46 - Stock-based compensation 2,817 2,620 Depreciation and amortization 1,567 3,544 Amortization of ROU asset 695 53 Changes in operating assets and liabilities: Accounts receivable ( 1,311 ) 2,502 Prepaid expenses ( 502 ) ( 1,139 ) Inventory ( 1,847 ) ( 671 ) Other assets 168 428 Accounts payable and accrued liabilities 6,951 ( 1,104 ) Accrued interest and accrued liabilities, related party 7 7 Accrued payroll and sales taxes payable 404 345 Lease liability ( 693 ) 920 Deferred tax assets, net ( 107 ) - Other liabilities ( 630 ) 1,632 Net cash used in operating activities ( 2,001 ) ( 1,792 ) Cash flows from investing activities Payment for additional ownership in subsidiary ( 3,518 ) - Payment for acquisition, net of cash acquired - ( 4,392 ) Purchase of property and equipment ( 230 ) ( 976 ) Proceeds from sale of other assets ( 175 ) - Net cash used in investing activities ( 3,923 ) ( 5,368 ) Cash flows from financing activities Proceeds from private placement - 13,295 Proceeds from ESPP stock issuance 27 14 Proceeds from exercise of options and warrants 147 435 Dividends paid ( 1,448 ) - Payments on notes/loans payable ( 3,092 ) ( 4,793 ) Proceeds from the issuance of notes/loans payable 4,822 2,172 Proceeds from draw on line of credit 1,879 926 Net cash provided by financing activities 2,335 12,049 Net change in cash and cash equivalents ( 3,589 ) 4,889 Effect of foreign exchange rates on cash and cash equivalents 295 ( 23 ) Cash and cash equivalents at beginning of period 7,085 5,127 Cash and cash equivalents at end of period $ 3,791 $ 9,993 Non-cash activities: Stock issued for services $ - $ 188 Declared dividends payable $ 24 $ - Net assets acquired in business combination $ - $ 13,052 Stock options and warrants issued $ - $ 171 Right of use asset acquired in exchange for lease liability $ - $ 1,276 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,569 $ 1,101 Cash paid for income taxes $ 66 $ 110 The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements. F- 4 OMNIQ CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The condensed consolidated financial statements include the accounts of OMNIQ Corp, and its wholly owned subsidiaries, referred to herein as “we,” “us,” “OMNIQ,” or the “Company”. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021. During nine-month period ended September 30, 2022, there were no significant changes to those accounting policies. Net Loss Per Common Share Net 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 nine-months ended September 30, 2022, and 2021 were 7,558,311 and 5,971,440 , respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are anti-dilutive. The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported as of: SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNINGS PER SHARE In thousands September 30, 2022 September 30, 2021 Options to purchase common stock 2,174 1,654 Warrants to purchase common stock 1,482 1,404 Potential shares excluded from diluted net loss per share 3,656 3,058 F- 5 NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. 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 products ● Timely and cost-effective development of products ● Working capital deficit of $ 32 million as of September 30, 2022 ● Accumulated deficit of $ 80 million as of September 30, 2022 ● Multiple years of net losses from operations ● Multiple years of negative cash flows from operations These 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. The following conditions, plans and actions are currently being implemented by management to address the Company’s conditions: ● The 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. ● The Company raised gross proceeds of $ 15 million from a private placement of its common stock in July 2021. ● The Company received financing for the acquisition of the last 23% of shares of Dangot on March 30, 2022. The 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 . ● The acquisition of Dangot has added capabilities to the Company which have already transformed into significant new orders in the Parking segment. Management expects the collaboration and cross sales to contribute to improved revenues and margins. ● Management is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations. ● March 25, 2022 management finalized an $ 8.5 M line of credit from Western Alliance Bank. This line of credit replaced 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 . ● As of September 30, 2022, the Company had approximately $ 3.8 million, in cash. ● Historical 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. ● Blue Star - The Company’s total accounts payable due to Blue Star as of September 30, 2022 was approximately $ 35 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 just 5 %. We anticipate, consistent with prior periods, Blue Star will continue to extend us such preferable payments terms in the foreseeable future. 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. Management 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. NOTE 3 – CONCENTRATIONS For the nine-months ended September 30, 2022 there were no customers concentrations to disclose, and for the year ended December 31, 2021, there were two customer accounted for 23 % of the Company’s consolidated revenues. Accounts receivable at September 30, 2022 and December 31, 2021 are made up of trade receivables due from customers in the ordinary course of business. Two customers made up 44.3 % of the accounts receivable balance at September 30, 2022 and one customer represented 17 % of the balance of accounts receivable at December 31, 2021. For the nine months ended September 30, 2022 and the year ended December 31, 2021 one vendor made up 65 % and 65 %, respectively, of our purchases. F- 6 NOTE 4 – BUSINESS ACQUISITION Dangot Computers Ltd On 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. Haim Dangot. The 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 of $ 2,084 thousand and (b) cash in the amount of $ 5,058 thousand and $ 600 thousand payable to owner. Effective October 1, 2021, the Company exercised a portion of its option and purchased an additional 26 % of Dangot bringing its ownership to 77 %. The Company paid $ 4,012,000 to purchase the additional shares. On April 1, 2022, the Company closed on its acquisition of Dangot and exercised the remaining portion of its option to purchase 23.0 % of the capital stock, thereby making Dangot a fully owned subsidiary of the Company. The Company paid $ 3,518,000 to purchase the additional shares. The Company utilized its working capital and a combination of short and long term loans. F- 7 NOTE 5 – CREDIT FACILITIES AND LINE OF CREDIT We maintain operating lines of credit, factoring and revolving credit facilities with banks and finance companies to provide us working capital. 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 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 million. BridgeBank reserves and withholds to 15 % of the face amount of each account purchased in a reserve account. During the nine months ended September 30, 2022 we had a net borrowing of an additional $ 1.8 million on the line and incurred $ 645 thousand in origination fees. 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 2021 Form 10-K. 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 . The 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. NOTE 6 – RELATED PARTY NOTES PAYABLE Related party notes payable, consisted of the following as of: SCHEDULE OF NOTES PAYABLE, RELATED PARTIES September 30, 2022 December 31, 2021 In thousands Note payable –Marin $ 240 $ 420 Note payable –Thomet 150 263 Total notes payable 390 683 Less current portion ( 390 ) ( 390 ) Long-term portion $ - $ 293 Note Payable -Marin In 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 September 30, 2022, was $ 71 thousand. Accrued interest is payable at maturity. Note Payable – Thomet In 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. Future maturities of related party notes payable as of September 30, 2022, are as follows: SCHEDULE OF FUTURE MATURITIES OF NOTES PAYABLE, RELATED PARTIES In thousands 2022 98 2023 292 Total $ 390 F- 8 NOTE 7 – NOTES PAYABLE SCHEDULE OF OTHER NOTES PAYABLE (In thousands) September 30, 2022 December 31, 2021 Note Payable- Supplier $ - $ 2,243 Note Payable other 10,850 7,924 Total 10,850 10,167 Less current portion ( 7,995 ) ( 7,521 ) Long Term Notes Payable $ 2,855 $ 2,646 Note Payable - Supplier On 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. ● On 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 % to 10 %. 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 other On July 29, 2021 the Company entered into a long-term loan from Leumi Bank totaling 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 installments 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 totaling NIS 3.5 million, which at the time was approximately $ 1.1 million. The note accrues interest at 7 % per annum and is payable in 8 installments 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 totaling NIS 17.5 million, as of September 30, 2022 the outstanding balance was NIS 17.5 million, approximately $ 4.9 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 September 30, 2022, the remaining balance was NIS 231 thousand, which was approximately $ 65 thousand. On March 27, 2022 the Company entered into another long-term loan from Leumi Bank totaling NIS 3.5 million, which at the time was approximately $ 1.1 million. The note accrues interest at 7 % per annum and is payable in 8 installments of principal and interest over 4 years . The note is secured by shares of Dangot Computers, Ltd. NOTE 8 – OTHER LIABILITIES SCHEDULE OF OTHER LIABILITIES (In thousands) September 30, 2022 December 31, 2021 Other vendor payable $ 801 $ 801 Dividend payable 145 1,418 Others 1,757 1,882 Total other liabilities 2,703 4,101 Less Current Portion ( 2,558 ) ( 2,683 ) Total long term other liabilities $ 145 $ 1,418 F- 9 NOTE 9 – STOCKHOLDERS’ EQUITY PREFERRED STOCK Series A As of September 30, 2022, there were 2,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250 common shares . Series B As of September 30, 2022, there was 1 preferred share designated and no preferred shares outstanding. Series C As of September 30, there were 3,000,000 Series C Preferred Shares (“Series C”) authorized with 544,500 issued and outstanding. 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 September 30, 2022, the accrued dividends on the Series C Preferred Stock was $ 71 thousand. The 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 . COMMON STOCK In 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, 1,118,856 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. No shares were issued under the Plan in 2021. On February 25, 2022, the Company granted 792,500 stock options. These options were granted to employees as part of the Company’s Equity Incentive Plan. For the nine months ending September 30, 2022, $ 147 thousand in stock options and stock warrants were exercised in exchange for 128,221 shares of OMNIQ common stock. In December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the nine months ending September 30, 2022 employees purchased 4,989 shares or $ 27 thousand of common stock. On June 15, 2022 our Board of Directors approved issuing 20,000 shares as part of a consulting agreement. The shares were valued at $ 109 thousand. On June 15, 2022 our Board of Directors granted 30,000 warrants as part of a consulting agreement. The shares were valued at $ 176 thousand. On June 15, 2022 our Board of Directors granted 30,000 stock options as part of a consulting agreement. The shares were valued at $ 173 thousand. On August 8, 2022 our Board of Directors approved issuing 80,000 shares as compensation for executives valued at $ 670 thousand. As of September 30, 2022 the shares have not been issued. On August 8, 2022 our Board of Directors approved issuing 40,000 warrants as part of a consulting agreement valued at $ 209 thousand. NOTE 10 – LITIGATION 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 intends to defend the case. This case was filed in the Superior Court of the State of California, County of San Diego on October 21, 2020. The 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 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. NOTE 11 – SUBSEQUENT EVENTS On October 23, 2022, the Company granted 19,000 stock options valued at $ 91 thousand to certain employees under the Company’s 2021 Equity Incentive Plan. F- 10