OMNIQ Corp. 10-Q

ITEM 1. FINANCIAL STATEMENTS OMNIQ CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) September 30, 2023 December 31, 2022 As of (In thousands, except share and per share data) September 30, 2023 December 31, 2022 ( UNAUDITED ) ASSETS Current assets Cash and cash equivalents $ 408 $ 1,311 Accounts receivable, net 18,472 23,893 Inventory 6,044 8,726 Prepaid expenses 787 1,268 Other current assets 33 473 Total current assets 25,744 35,671 Property and equipment, net of accumulated depreciation of $ 1,084 and $ 1,030 respectively 1,263 1,086 Goodwill 16,363 16,542 Trade name, net of accumulated amortization of $ 4,768 and $ 4,458 , respectively 1,364 1,826 Customer relationships, net of accumulated amortization of $ 11,161 and $ 10,762 , respectively 3,898 4,967 Other intangibles, net of accumulated amortization of $ 1,569 and $ 1,541 , respectively 532 675 Right of use lease asset 2,490 2,300 Other assets 1,399 1,744 Total Assets 53,053 64,811 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities $ 53,406 $ 54,736 Line of credit 2,660 1,971 Accrued payroll and sales tax 1,653 2,633 Notes payable, related parties – current portion - 293 Notes payable – current portion 8,828 11,572 Lease liability – current portion 1,007 942 Other current liabilities 1,390 1,394 Total current liabilities 68,944 73,541 Long term liabilities Notes payable, related party, less current portion - - Accrued interest and accrued liabilities, related party 73 72 Notes payable, less current portion 1,427 55 Lease liability 1,519 1,404 Other long term liabilities 282 265 Total liabilities 72,245 75,337 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, 502,000 shares issued and 544,500 outstanding, respectively 1 1 Preferred stock value 1 1 Common stock; $ 0.001 par value; 15,000,000 shares authorized; 7,893,067 and 7,714,780 shares issued and outstanding, respectively. 8 8 Additional paid-in capital 75,523 73,714 Accumulated (deficit) ( 96,162 ) ( 84,460 ) Cumulative Translation Adjustment 1,438 211 Total OmniQ stockholders’ equity (deficit) ( 19,192 ) ( 10,526 ) Total liabilities and equity (deficit) $ 53,053 $ 64,811 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) (In thousands, except share and per share data) 2023 2022 2023 2022 For the three months ending For the Nine months ended September 30, September 30, (In thousands, except share and per share data) 2023 2022 2023 2022 Revenues Total Revenues $ 17,480 $ 27,008 $ 65,748 $ 77,539 Cost of goods sold Cost of goods sold 13,471 21,032 52,131 59,449 Gross profit 4,009 5,976 13,617 18,090 Operating expenses Research & Development 482 445 1,464 1,436 Selling, general and administrative 5,585 7,624 17,667 21,173 Depreciation 146 91 349 241 Amortization 418 474 1,276 1,326 Total operating expenses 6,631 8,634 20,756 24,176 Loss from operations ( 2,622 ) ( 2,658 ) ( 7,139 ) ( 6,086 ) Other income (expenses): Interest expense ( 898 ) ( 880 ) ( 2,575 ) ( 2,569 ) Other (expenses) income ( 1,000 ) ( 217 ) ( 2,473 ) ( 870 ) Total other expenses ( 1,898 ) ( 1,097 ) ( 5,048 ) ( 3,439 ) Net Loss Before Income Taxes ( 4,520 ) ( 3,755 ) ( 12,187 ) ( 9,525 ) Provision for Income Taxes Current 215 ( 55 ) 509 ( 41 ) Total Provision for Income Taxes 215 ( 55 ) 509 ( 41 ) Net Loss $ ( 4,305 ) $ ( 3,810 ) $ ( 11,678 ) $ ( 9,566 ) Net income attributable to noncontrolling interest - - - 67 Net Loss attributable to OmniQ Corp $ ( 4,305 ) $ ( 3,810 ) $ ( 11,678 ) $ ( 9,633 ) Net Loss $ ( 4,305 ) $ ( 3,810 ) $ ( 11,678 ) $ ( 9,566 ) Foreign currency translation adjustment 510 241 1,227 260 Comprehensive loss ( 3,795 ) ( 3,569 ) ( 10,451 ) ( 9,306 ) Reconciliation of net loss to net loss attributable to common shareholders Net loss ( 4,305 ) ( 3,810 ) ( 11,678 ) ( 9,566 ) Less: Dividends attributable to non-common stockholders’ of OmniQ Corp ( 8 ) ( 149 ) ( 24 ) ( 197 ) Net income attributable to noncontrolling interest - - - - Net loss attributable to common stockholders’ of OmniQ Corp ( 4,313 ) ( 3,959 ) ( 11,702 ) ( 9,763 ) Net (loss) per share - basic attributable to common stockerholders’ of OmniQ Corp $ ( 0.55 ) $ ( 0.52 ) $ ( 1.50 ) $ ( 1.29 ) Weighted average number of common shares outstanding – basic 7,891,444 7,578,351 7,788,262 7,545,190 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, 2021 544 $ 1 7,459 20 70,606 ( 70,571 ) 2,396 ( 154 ) 2,298 Dividend on Class C Shares - - - - - ( 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 warrant 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 ) Balance, December 31, 2022 544 $ 1 7,714 $ 8 $ 73,714 $ ( 84,460 ) - $ 211 $ ( 10,526 ) Dividend on Class C Shares - - - - - ( 8 ) - - ( 8 ) ESPP Stock Issuance - - 2 - 10 - - - 10 Stock and Warrant issued for services - - 10 - 45 - - - 45 Stock-based compensation – options, warrants, issuances - - - - 516 - - - 516 Exercise of stock options and warrants - - 156 - 173 - - - 173 Conversion of shares ( 42 ) - 2 - - - - - - Cumulative Translation Adjustment - - - - - - - 457 457 Net (loss) income - - - - - ( 3,507 ) - - ( 3,507 ) Balance, March 31, 2023 502 $ 1 7,884 $ 8 $ 74,458 $ ( 87,975 ) $ - $ 668 $ ( 12,840 ) Balance 502 $ 1 7,884 $ 8 $ 74,458 $ ( 87,975 ) $ - $ 668 $ ( 12,840 ) Dividend on Class C Shares - - - - - ( 8 ) - - ( 8 ) ESPP Stock Issuance - - 2 - 8 - - - 8 Exercise of stock options and warrants - - 4 - 18 - - - 18 Stock-based compensation – options, warrants, issuances - - - - 516 - - - 516 Cumulative Translation Adjustment - - - - - - - 260 260 Net (loss) income - - - - - ( 3,866 ) - - ( 3,866 ) Balance, June 30, 2023 502 $ 1 7,890 $ 8 $ 75,000 $ ( 91,849 ) $ - $ 928 $ ( 15,912 ) Balance 502 $ 1 7,890 $ 8 $ 75,000 $ ( 91,849 ) $ - $ 928 $ ( 15,912 ) Dividend on Class C Shares - - - - - ( 8 ) - - ( 8 ) ESPP Stock Issuance - - 3 - 7 - - - 7 Stock and Warrant issued for services - - 10 - 45 - - - 45 Stock and Warrant issued for services, shares - - 10 - 45 - - - 45 Stock-based compensation – options, warrants, issuances - - - - 516 - - - 516 Cumulative Translation Adjustment - - - - - - - 510 510 Net (loss) income - - - - - ( 4,305 ) - - ( 4,305 ) Balance, September 30, 2023 502 $ 1 7,893 $ 8 $ 75,523 $ ( 96,162 ) $ - $ 1,438 $ ( 19,192 ) Balance 502 $ 1 7,893 $ 8 $ 75,523 $ ( 96,162 ) $ - $ 1,438 $ ( 19,192 ) The accompanying unaudited notes should be read in conjunction with these condensed unaudited consolidated financial statements. F- 3 OMNIQ CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW For the nine months ended September 30, (In thousands) 2023 2022 Cash flows from operations Net loss $ ( 11,678 ) $ ( 9,566 ) Adjustments to reconcile net loss to net cash provided by operating activities: Loss on disposal of PP&E - 46 Stock-based compensation 1,548 2,817 Stock and warrant issued for services 45 - Depreciation and amortization 1,625 1,567 Amortization of ROU asset 838 695 Changes in operating assets and liabilities: Accounts receivable 4,097 ( 1,311 ) Prepaid expenses 446 ( 502 ) Inventory 2,158 ( 1,847 ) Other assets 537 168 Accounts payable and accrued liabilities ( 469 ) 6,951 Accrued interest and accrued liabilities, related party 1 7 Accrued payroll and sales taxes payable ( 882 ) 404 Lease liability ( 847 ) ( 693 ) Deferred tax assets, net 4 ( 107 ) Other liabilities ( 74 ) ( 630 ) Net cash provided by (used in) operating activities ( 2,651 ) ( 2,001 ) Cash flows from investing activities Payment for additional ownership in subsidiary - ( 3,518 ) Purchase of property and equipment 457 ( 230 ) Proceeds from sale of other assets 141 ( 175 ) Net cash provided by (used in) investing activities 598 ( 3,923 ) Cash flows from financing activities Proceeds from ESPP stock issuance 25 27 Proceeds from exercise of options and warrants 191 147 Dividends paid to non-controlling interest - ( 1,448 ) Payments on notes/loans payable ( 1,082 ) ( 3,092 ) Proceeds from the issuance of notes/loans payable 393 4,822 Proceeds from draw on line of credit 796 1,879 Net cash (used in) provided by financing activities 323 2,335 Net change in cash and cash equivalents ( 1,730 ) ( 3,589 ) Effect of foreign exchange rates on cash and cash equivalents 827 295 - Cash and cash equivalents at beginning of period 1,311 7,085 Cash and cash equivalents at end of period $ 408 $ 3,791 Non-cash activities: Stock issued for services $ - $ 298 Declared dividends payable $ 24 $ 24 Right of use asset acquired in exchange for lease liability $ 120 $ - Supplemental disclosure of cash flow information: Cash paid for interest $ 2,592 $ 2,569 Cash paid for income taxes $ - $ 66 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, 2022 (the “2022 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, 2022. During nine-month period ended September 30, 2023, 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, 2023, and 2022 were 7,788,262 and 7,545,190 , 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 antidilutive. 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 EARNING PER SHARE September 30, 2023 September 30, 2022 Options to purchase common stock 1,601,657 2,173,583 Warrants to purchase common stock 1,431,734 1,481,734 Potential shares excluded from diluted net loss per share 3,033,391 3,655,317 Contract Balances We recognize revenue once the product has been shipped. For some transactions we collect a deposit on the transaction. These deposits represent cash received under noncancelable contracts before the related product or service is transferred to the customer. We record this as a customer deposit, which is included in accounts payable and other accrued expenses on our consolidated balance sheet. Such amounts are recognized as revenue by the Company upon shipment of the product or performance of the services when the revenue recognition criteria is met and generally within one year. The balances of customer deposits included in accounts payable and other accrued expenses as of September 30, 2023, and December 31, 2022 were approximately $ 573 thousand and $ 1 million, respectively. The amount of revenue recognized in the nine-months ended September 30, 2023, that related to the customer deposits as of December 31, 2022 was $1.2 million. 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 $ 43 million as of September 30, 2023 ● Accumulated deficit of $ 96 million as of September 30, 2023 ● Multiple periods of losses from operations ● Noncompliance with certain debt covenants These facts and others have 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 to address the Company’s conditions: ● Outstanding warrants exist from prior offerings that could be exercised for cash depending upon the performance of our stock. ● The Company’s acquisition of Dangot Computers, Ltd. has improved the balance sheet, profitability, and cash flow and is expected to help the Company as a whole to generate positive cash flows from operations for the foreseeable future. ● 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. ● Blue Star - The Company’s total accounts payable due to Blue Star as of September 30, 2023, was approximately $39 million. Blue Star is an unsecured creditor, financing a substantial amount the Company’s supply chain demand. Management believes that Blue Star will continue supplying the Company with preferable credit terms. Blue Star has agreed to the annual interest rate of 5% on invoices that are past due. 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 is in the process of finalizing a new line of credit with an additional financial institution. ● In October 2023 management finalized an equity raise which resulted in $ 2.5 million in net cash received from investors. See note 12. NOTE 3 – CONCENTRATIONS For the nine-months ended September 30, 2023 and the year ended December 31, 2022, no customers accounted for more than 10 % and two customers accounted for 30 %, respectively, of the Company’s consolidated revenues. Accounts receivable at September 30, 2023 and December 31, 2022 are made up of trade receivables due from customers in the ordinary course of business. No customer accounted for more than 10 % of the outstanding receivables as of September 30, 2023, or December 31, 2022. For the nine months ended September 30, 2023 and the year ended December 31, 2022 one vendor made up 29 % and 65 %, respectively, of our purchases. F- 6 NOTE 4 – BUSINESS ACQUISITION Dangot Computers Ltd 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. NOTE 5 – INVENTORY Inventory consisted of the following as of: SCHEDULE OF INVENTORY In thousands September 30, 2023 December 31, 2022 Raw materials $ 671 $ 649 Inventory in transit 455 2,004 Finished goods (less allowance) 4,918 6,073 Total inventories $ 6,044 $ 8,726 NOTE 6 – 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 with 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. 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 7 – RELATED PARTY NOTES PAYABLE Related party notes payable, consisted of the following as of: SCHEDULE OF NOTES PAYABLE, RELATED PARTIES September 30, 2023 December 31, 2022 In thousands Note payable –Marin $ - $ 180 Note payable –Thomet - 113 Total notes payable - 293 Less current portion - ( 293 ) Long-term portion $ - $ - 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, 2023, was $ 73 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. F- 7 NOTE 8 – NOTES PAYABLE SCHEDULE OF NOTES PAYABLE (In thousands) September 30, 2023 December 31, 2022 Note payable other 10,255 11,627 Total 10,255 11,627 Less current portion 8,828 11,572 Long term notes payable $ 1,427 $ 55 Notes Payable Other 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 the Israeli Prime Rate plus 4.5 % which currently equals 8.25 % 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 the Israeli Prime Rate plus 4.5 % which currently equals 8.25 % 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 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. 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 the Israeli Prime Rate plus 4.5 % which currently equals 8.25 % 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 September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totalling NIS 3 million, which at the time was approximately $ 0.9 million. The note accrues interest at 6.03 % per annum and is payable in 36 instalments of principal and interest over 3 years. During the year ended December 31, 2022, the Company entered into five short term loans totalling NIS 26.8 million, approximately $ 7.6 million. The note accrues average interest at 6.3 % per annum. On September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling 1.5 M NIS. The note accrues interest at the Israeli Prime Rate plus 3.5 % which currently equals 9.75 % per annum and is payable in 36 monthly installments. As of September 30, 2023, the Company was not in compliance with certain financial covenants related to the Bank Leumi and Bank Hapoalim debt. The Company’s failure to comply with these financial covenants could result in an event of default under its debt agreements. Therefore, we reclassified the total balance as current debt on the balance sheet. The Company is actively pursuing options to address its noncompliance. The lenders have not requested early repayment of the loan as of the date when these financial statements were available to be issued. NOTE 9 – OTHER LIABILITIES SCHEDULE OF OTHER LIABILITIES (In thousands) September 30, 2023 December 31, 2022 Other vendor payable $ 803 $ 801 Dividend payable 174 153 Others 695 705 Total other liabilities 1,672 1,659 Less Current Portion 1,390 1,394 Total long term other liabilities $ 282 $ 265 F- 8 NOTE 10 – STOCKHOLDERS’ EQUITY PREFERRED STOCK Series A As of September 30, 2023, 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, 2023, there was 1 preferred share designated and no preferred shares outstanding. Series C As of September 30, 2023, there were 3,000,000 Series C Preferred Shares (“Series C”) authorized with 502,000 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, 2023, the accrued dividends on the Series C Preferred Stock were $ 174 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 was approved by our stockholders at the December 2021, shareholders’ meeting. 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. No options were issued in the nine months ended September 30, 2023. For the nine months ending September 30, 2023, 235,426 in stock options were exercised in exchange for 158,934 shares of OMNIQ common stock. No warrants were exercised. In December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the nine months ending September 30, 2023, employees purchased 7,103 shares or $ 25 thousand of common stock. On August 10, 2022, our Board of Directors approved issuing 10,000 shares as part of an employment agreement. Shares were issued January 3, 2023, and valued at $ 45 thousand. F- 9 NOTE 11 – 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 12 – SUBSEQUENT EVENTS On July 6, 2023, OmniQ Corp. (the “Company”) entered into a Share and Rights Purchase Agreement (the Agreement”) with Afcon Holdings Ltd., (“Afcon”), a company organized under the laws of the State of Israel, and Ateka Ltd. (“Ateka”), a company organized under the laws of the State of Israel (Afcon and Ateka, jointly and severally, shall be referred to together as the “Sellers”) (OminQ and its newly formed wholly owned subsidiary which shall be alternatively referred to together as the “Company” or the “Purchaser”), and Tadiran Telecom Communication Services in Israel Ltd. (“TBSI”), a company organized under the laws of the State of Israel, Tadiran Telecom Communication Services in Israel L.P. (“TBSI LP”), a limited partnership organized under the laws of the State of Israel, Tadiran Telecom Technologies (2011) Ltd. (“TTT”), a company organized under the laws of the State of Israel, Tadiran Telecom (TTL) L.P. (“TTL LP”) a limited partnership organized under the laws of the State of Israel (TBSI, TBSI LP, TTT and TTL LP shall be referred together as “TT”). The Agreement provided for termination after 60 days if not renewed. On October 4, 2023, as a result of the non-fulfilment of certain conditions, the Company and the Sellers mutually terminated the Agreement, as a result of the termination, the Company will not make the $ 12,500,000 cash payment and the issuance of shares of common stock having a value of $ 2,750,000 . Additionally, the Agreement provides for a mutual release of claims among the parties and their affiliates, in the event of an effective termination. On October 5, 2023, OmniQ Corp. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC, as representatives (the “Representatives”) of the several underwriters named therein (collectively, the “Underwriters”), relating to the issuance and sale (the “Offering”) of 2,775,000 shares of the Company’s common stock, par value $ 0.001 per share, at a price to the public of $ 1.00 per share (the “Underwritten Shares”) and pre-funded warrants (the “Pre-Funded Warrants”) to purchase 225,000 shares of the Company’s common stock at a price to the public of $ 0.999 per Pre-Funded Warrant. Under the terms of the Underwriting Agreement, the Underwriters have agreed to purchase the Underwritten Shares from the Company at a price of $ 1.00 per share and the Pre-Funded Warrants at a price of $ 0.999 per Pre-Funded Warrant. The Company also granted the Underwriters an option exercisable for 45 days from the date of the Underwriting Agreement to purchase up to an additional 450,000 shares of common stock solely for the purpose of covering over-allotments (together with the Underwritten Shares, the “Shares”). All of the Shares and Pre-Funded Warrants in the Offering are being sold by the Company. The Company also issued warrants to the Representative (the “Representative’s Warrants”), exercisable to purchase 140,000 shares of common stock, at an exercise price of $ 1.25 per share. The gross proceeds from the Offering are expected to be approximately $ 3.0 million before deducting underwriting discounts and commissions and other offering expenses payable by the Company and assuming no exercise of the Underwriters’ option to purchase additional shares. The Offering closed on October 11, 2023. We are closely monitoring developments in the war between Israel and Hamas that began on October 7, 2023 including potential impacts to The Companies business, customers, suppliers, employees, and operations in Israel, the Middle East and elsewhere. At this time, impacts to The Company are uncertain and subject to change given the volatile nature of the situation. F- 10