What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 52 added, 111 removed, 75 unchanged (68% of the section changed)

37 unchanged sentences

Report on Form 10-K for the year ended December 31, 2022 and Item 1A — “Risk Factors” in this Quarterly Report on Form

10-Q for the quarterly period ended September 30, 2022, as well as other reports and registration statements filed by us with the SEC.

These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form

10-Q and our other public filings.

For more information about us and the announcements we make from time to time, visit our Internet

website at www.omniq.com.

10-Q for the quarterly period ended March 31, 2023, as well as other reports and registration statements filed by us with the SEC.

factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q

and our other public filings.

For more information about us and the announcements we make from time to time, visit our Internet website

at www.omniq.com.

use patented and proprietary artificial intelligence (AI) technology to deliver data collection, real time surveillance and monitoring

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and analysis should be read in conjunction with our unaudited condensed consolidated financial statements contained in this Form 10-Q.

Company’s sales from operations for the nine months ended September 30, 2022, were $77.5 million, an increase of approximately

$24 million, or 45.25%, over the nine months ended September 30, 2021.

loss from operations for the nine months ended September 30, 2022, was $6.1 million, a decrease of $2.8 million compared with the

loss in the nine months ended September 30, 2021, of $8.9 million.

Basic loss per share from continuing operations for the nine

months ended September 30, 2022, was ($1.29) versus ($1.86) per share for the same period in 2021.

Company’s sales from operations for the three months ended March 31, 2023, were $27.8 million, an increase of approximately $1.5

million, or 5.7%, over the three months ended March 31, 2022.

loss from operations for the three months ended March 31, 2023, was $2 million, an increase of $602 thousand compared with the loss

in the three months ended March 31, 2022, of $1.4 million.

Basic loss per share from continuing operations for the three months ended

March 31, 2023, was ($0.45) versus ($0.34) per share for the same period in 2022.

Comprehensive loss for the three months ended March 31, 2023 and 2022 was $3.1 million and $2.6 million respectively,

the only component to comprehensive loss besides net loss is foreign currency translation.

AND CAPITAL RESOURCES

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

the need for operational cash with the need to add additional products

and cost-effective development of products

capital deficit of $32 million as of September 30, 2022

deficit of $80 million as of September 30, 2022

years of net losses from operations

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 received financing for the acquisition of the last 23% of shares of Dangot at a loan to value rate of 85%.

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.

acquisition of Dangot has added capabilities to the Company which have already transformed into significant new orders (so far approx.

$1.3M) 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.

finalized an $8.5M line of credit from Western Alliance Bank.

This line of credit will replace the high interest Action Capital line

of Credit ($6M) and settle the ScanSource debt $2.5M.

Overall the effective interest rate of the new line of credit is approx.

compared to 12% with Action and 10% with ScanSource.

of September 30, 2022, the Company had approximately $3.8 million, in cash.

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 September 30, 2022 was approximately $35 M.

an unsecured creditor, financing a substantial amount of 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 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.

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.

of March 31, 2023, the Company had cash in the amount of $3.2 million and a working capital deficit of $39.6 million, compared to cash

in the amount of $1.3 million, and a working capital deficit of $38 million as of December 31, 2022.

The Company had stockholders’

deficit attributable to OmniQ stockholders of $12.8 million and $10.5 million as of March 31, 2023, and December 31, 2022, respectively.

This increase in our stockholders’ deficit was primarily attributable to net losses.

Company’s accumulated deficit was $88 million and $84.4 million as of March 31, 2023, and December 31, 2022.

Company’s operations used net cash of $1.3 million and $775 thousand in the three months ended March 31, 2023, and 2022, respectively.

The increase in cash used in operations of $514 thousand is due to the increase in revenue.

Company’s cash used in investing activities was $341 thousand for the three months ended March 31, 2023, compared to cash used

in investing activities of $64 thousand for the three months ended March 31, 2022.

Company’s financing activities provided $3 million of cash during the three months ended March 31, 2023, and provided $968 thousand

during the three months ended March 31, 2022.

During the three months ended March 31, 2023, the Company made payments of $544 thousand

on its notes payable, including its Supplier Secured Promissory note and related party notes payable, compared to the net proceeds from

the three months ended March 31, 2022, of $566 thousand on its notes payable, including its Supplier Secured Promissory note and related

party notes payable.

Additionally, the Company borrowed $3.4 million on the Company’s line of credit during the three months ended

March 31, 2023, compared to the three months ended March 31, 2022, when $1.7 million was borrowed on the Company’s line of credit.

of Operations

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

Three months ended September 30,

Three months ended March 31,

Cost of Goods sold

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Net Loss per common Share from continuing operations

the three months ended September 30, 2022 and 2021, the Company generated net revenues in the amount of $27 million and $20.5 million,

the three months ended March 31, 2023, and 2022, the Company generated net revenues in the amount of $27.8 million and $26.3 million,

respectively.

The increase between the three-month periods was attributable to the additional sales channel’s provided by the acquisition

The increase between the three-month periods was attributable to the additional sales channels.

of Goods Sold

the three months ended September 30, 2022 and 2021, the Company recognized a total of $21 million and $15.8 million, respectively, of

cost of goods sold.

For the three months ended September 30, 2022 and 2021, cost of goods sold were 78% and 77% of net revenues, respectively.

operating expense for the three months ended September 30, 2022 and 2021 recognized was $8.6 million and $8.9 million, respectively,

representing a 2.8% decrease.

and Development – Research and development expenses for the three months ended September 30, 2022 and 2021 totaled $445

thousand and $474 thousand, respectively.

general and Administrative – Selling, general and administrative expenses for the three months ended September 30, 2022

and 2021 totaled $7.6 million and $6.8 million, respectively.

The increase is due to non-cash stock compensation for employees and consultants.

– Depreciation expenses for the three months ended September 30, 2022 and 2021 totaled $91 thousand and $82 thousand, respectively,

representing a 11% increase.

The increase is attributable to the addition of fixed assets.

amortization – Intangible amortization expenses for the three months ended September 30, 2022 and 2021 totaled $474 thousand

and $1.5 million, respectively.

The decrease is due to diminishing life of intangibles.

income and expenses

Expense – Interest expense for the three months ended September 30, 2022 totaled $880 thousand, as compared to $587 thousand

for the three months ended September 30, 2021.

The increase is primarily attributable to additional lines of credit.

Nine months ended September 30,

the three months ended March 31, 2023, and 2022, the Company recognized a total of $22 million and $20.2 million, respectively, of

cost of goods sold.

Operating Expenses

Loss from operations

Net Loss per common Share from continuing operations

the nine months ended September 30, 2022 and 2021, the Company generated net revenues in the amount of $78 million and $53 million, respectively.

The increase between the nine-month periods was attributable to the additional sales channel’s provided by the acquisition of Dangot.

of Goods Sold

the nine months ended September 30, 2022 and 2021, the Company recognized a total of $59 million and $43 million, respectively, of cost

of goods sold.

For the nine months ended September 30, 2022 and 2021, cost of goods sold were 77% and 80% of net revenues, respectively.

The 2022 decrease in cost of goods sold as a percentage of net revenue was attributable to discounts being granted during the Covid pandemic

which are no longer being offered.

operating expense for the nine months ended September 30, 2022 and 2021 recognized was $24 million and $20 million, respectively, representing

For the three months ended March 31, 2023, and 2022, cost of goods sold were 79% and 77% of net revenues, respectively.

operating expenses for the three months ended March 31, 2023, and 2022 recognized was $7.7 million and $7.5 million, respectively, representing

a 2.6% increase.

The increases are related to the additional operations from Dangot.

and Development – Research and development expenses for the nine months ended September 30, 2022 and 2021 totaled $1.4

million and $1.4 million, respectively.

general and Administrative – Selling, general and administrative expenses for the nine months ended September 30, 2022

and 2021 totaled $21.2 million and $15.3 million, respectively, representing a 38% increase.

The increase was due to increased number

of employees and operating activities from the acquisition of Dangot and non-cash stock compensation for employees and consultants.

– Depreciation expenses for the nine months ended September 30, 2022 and 2021 totaled $241 thousand and $167 thousand,

respectively, representing a 44% increase.

The increase is directly increased by the acquisition of additional fixed assets.

amortization – Intangible amortization expenses for the nine months ended September 30, 2022 and 2021 totaled $1.3 million

and $2.6 million, respectively.

The increase in operating expenses was due primarily to the increase in revenue.

and Development – Research and development expenses for the three months ended March 31, 2023, and 2022 totaled $423 thousand

and $523 thousand, respectively, representing a 19% decrease.

The decreases are primarily attributed to the maturity of the development

of solutions offered for our AI proprietary products.

general and Administrative – Selling, general and administrative expenses for the three months ended March 31, 2023, and

2022 totaled $6.8 million and $6.5 million, respectively, representing a 4.5% increase.

The increase was due primarily to the increase

– Depreciation expenses for the three months ended March 31, 2023, and 2022 totaled $108 thousand and $93 thousand, respectively,

representing a 16% increase.

The increase is directly related to the acquisition of additional fixed assets.

amortization – Intangible amortization expenses for the three months ended March 31, 2023, and 2022 totaled $436 thousand

and $445 thousand, respectively.

The decrease is due to diminishing life of intangibles.

income and expenses

Expense – Interest expense for the nine months ended September 30, 2022 totaled $2.6 million, as compared to $1.9 million

for the nine months ended September 30, 2021.

Expense – Interest expense for the three months ended March 31, 2023, totaled $938 thousand, as compared to $812 thousand

for the three months ended March 31, 2022.

The increase is primarily attributable to additional lines of credit.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis