What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-14 compared with 2025-08-19 · 106 added, 73 removed, 73 unchanged (71% of the section changed)

37 unchanged sentences

a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our 2024

Form 10-K and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended June 30,

Form 10-K and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September

30, 2025, as well as other reports and registration statements filed by us with the SEC.

17 unchanged sentences

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

Pursuant to the asset sale described in the Notes

to the Financial Statements, the assets of one division were sold during the second quarter of 2025.

Accordingly, the financial statements

have reclassified the related revenues and expenses from both prior periods and the current period into a single line item for “Discontinued

Operations” on the face of the financial statements, with further detail provided in the accompanying Notes.

Company’s sales for the six months ended June 30, 2025, and 2024, were $15.8 million and $17.6 million, respectively.

between the six-month periods was attributable to deceleration of projects by customers.

loss from operations for the six months ended June 30, 2025, was $678 thousand, a decrease of $569 thousand compared with the loss in

the six months ended June 30, 2024, of $2.27 million.

Basic loss per share from continuing operations for the six months ended June 30,

2025, was ($0.00) versus ($0.48) per share for the same period in 2024.

Comprehensive loss for the six months ended June 30, 2025 and

2024 was $1.87 million and $3.7 million respectively, the only component to comprehensive loss besides net loss is foreign currency translation.

to the asset sale described in the Notes to the Financial Statements, the assets of one division was sold during the second quarter

Accordingly, the financial statements have reclassified the related revenues and expenses from both prior periods and the current

period into a single line item for “Discontinued Operations” on the face of the financial statements, with further detail

provided in the accompanying Notes.

The Company’s sales from operations for the nine months ended September

30, 2025, were $24 million, a decrease of approximately $2.8 million, or 10%, over the nine months ended September 30, 2024.

loss from operations for the nine months ended September 30, 2025, was $1.3 million, a decrease of $1.8 million compared with the loss

in the nine months ended September 30, 2024, of $3.1 million.

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

September 30, 2025, was $0.09 versus loss of ($0.46) per share for the same period in 2024.

AND CAPITAL RESOURCES

of June 30, 2025, the Company had cash in the amount of $2.2 million and a working capital deficit of $10.9 million, compared to cash

in the amount of $2.3 million, and a working capital deficit of $54.4 million as of December 31, 2024.

The Company had stockholders’

deficit attributable to OmniQ stockholders of $11 million and $43.8 million as of June 30, 2025, and December 31, 2024, respectively.

This decrease in our stockholders’ deficit was primarily attributable to sale of assets.

Company’s accumulated deficit was $124 million and $124 million as of June 30, 2025, and December 31, 2024.

Company’s operations provided net cash of $6.08 million and used $3.6 million in the six months ended June 30, 2025, and 2024,

respectively.

The increase in cash provided in operations of approximately $10 million is due to the increase in revenue and decrease

Company’s cash used in investing activities was $2.5 million for the six months ended June 30, 2025, compared to cash used in investing

activities of $103 thousand for the six months ended June 30, 2024.

Company’s financing activities used $1.7 million of cash during the six months ended June 30, 2025, and used $1.34 million

during the six months ended June 30, 2024.

As of September 30, 2025, the Company had cash in the amount of $679 thousand

and a working capital deficit of $11.8 million, compared to cash in the amount of $2.3 million, and a working capital deficit of $54 million

as of December 31, 2024.

The Company had stockholders’ deficit attributable to OmniQ stockholders of $13 million and $43.9 million

as of September 30, 2025, and December 31, 2024, respectively.

This decrease in our stockholders’ deficit was primarily attributable

to the sale of one of the divisions at June 30, 2025.

The Company’s accumulated deficit was $124.7

million and $123.9 million as of September 30, 2025, and December 31, 2024.

The Company’s operations provided net cash of $5.4 million and

provided $230 thousand in the nine months ended September 30, 2025, and 2024, respectively.

The increase in cash used by operations of $5.2

million is due to an increase in accounts receivables being received as well as reliance on accounts payable being accrued.

Company’s cash used in investing activities was $2.5 million for the nine months ended September 30, 2025, compared to cash

used by investing activities of $87 thousand for the nine months ended September 30, 2024.

The Company’s financing activities

used $2 million of cash during the nine months ended September 30, 2025, and used $2.4 million during the nine months ended

September 30, 2024.

During the nine months ended September 30, 2025, the Company made payments of $3.4 million on its notes

payable, compared to the payments of $2.7 million for the nine months ended September 30, 2024.

of Operations

following tables set forth certain selected unaudited condensed consolidated statements of operations data for the periods indicated

following tables set forth certain selected unaudited condensed consolidated statement of operations data for the periods indicated in

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

Amounts are presented

in thousands.

For the 6 months ended

Three months ended September 30,

Cost of Goods sold

Operating Expenses

Income (Loss) from operations

Net income (loss) from continuing operations

Loss from discontinued operations (net of tax)

Net income (loss)

Loss from operations

Net Loss per common Share from continuing operations

the six months ended June 30, 2025, and 2024, the Company generated net revenues in the amount of $15.8 million and $17.6 million, respectively.

The decrease between the six-month periods was attributable to deceleration of projects by customers.

of Goods Sold

the six months ended June 30, 2025, and 2024, the Company recognized a total of $11.6 million and $13.5 million, respectively, of cost

For the three months ended September 30, 2025 and 2024, the Company generated

net revenues in the amount of $8.8 million and $9.5 million, respectively.

The decrease between the three-month periods was attributable

to the focusing on more profitable revenue and timing on some orders.

of Goods Sold

For the six months ended June 30, 2025, and 2024, cost of goods sold were 74% and 77% of net revenues, respectively.

operating expenses for the six months ended June 30, 2025, and 2024 recognized was $4.8 million and $6.4 million, respectively, representing

a 24% decrease.

The decrease in operating expenses was due primarily to management’s cost savings plan and the elimination of

expenses associated wit the legacy business sold in the second quarter of 2025.

and Development – Research and development expenses for the six months ended June 30, 2025, and 2024 totaled $969 thousand

and $856 thousand, respectively.

general and Administrative – Selling, general and administrative expenses for the six months ended June 30, 2025, and 2024

totaled $3.4 million and $4.9 million, respectively, representing a 31% decrease.

The decrease was due primarily to management’s

cost savings initiatives, including headcount reductions and lower professional-services fees, and the removal of expense associated

with the legacy business.

– Depreciation expenses for the six months ended June 30, 2025, and 2024 totaled $36 thousand and $199 thousand, respectively,

For the three months ended September 30, 2025 and 2024, the Company recognized

a total of $5.9 million and $7.43 million, respectively, of cost of goods sold.

For the three months ended September 30, 2025 and 2024,

cost of goods sold were 66% and 78% of net revenues, respectively.

Total operating expenses for the three months ended September 30, 2025

and 2024 recognized was $3.6 million and $2.9 million, respectively, representing a 23% increase.

The increase is related to the additional commissions incurred on the sale of the division.

and Development – Research and development expenses for the three months ended September 30, 2025 and 2024 totaled $436

thousand and $492 thousand, respectively.

general and Administrative – Selling, general and administrative expenses for the three months ended September 30, 2025

and 2024 totaled $2.9 million and $2.1 million, respectively, representing a 41% increase.

The increases are related to increases in

salaries for key people in 2025 relative to 2024.

– Depreciation expenses for the three months ended September 30, 2025 and 2024 totaled $17 thousand and $85 thousand, respectively,

representing an 80% decrease.

The decrease is directly related to the reduction in fixed assets following the sale of the legacy business.

amortization – Intangible amortization expenses for the six months ended June 30, 2025, and 2024 totaled $468 thousand

amortization – Intangible amortization expenses for the three months ended September 30, 2025 and 2024 totaled $245 thousand

and $228 thousand, respectively.

The modest increase is due the timing of amortization of customer relationships, trade names and other

intangible assets.

income and expenses

Expense – Interest expense for the six months ended June 30, 2025, totaled $403 thousand, compared to $538 thousand for the

six months ended June 30, 2024.

The change in interest expense is attributable to fluctuations in borrowings under the Company’s

credit facilities and the retirement of debt associated with the legacy business.

Other income and expenses include a gain on debt settlement

of $325 thousand recorded in the six months ended June 30, 2025, and $0 in the comparable 2024 period.

operations – On June 30, 2025, the Company completed the sale of its legacy business.

As a result, the assets and liabilities

of the legacy business were classified as held for sale and its results of operations for all periods presented have been reported as

discontinued operations.

For the six months ended June 30, 2025 and 2024, loss from discontinued operations (net of tax) was $1.7 million

Expense – Interest expense for the three months ended September 30, 2025 totaled $248 thousand, as compared to $250 thousand

for the three months ended September 30, 2024.

For the nine months ended September 30,

Cost of Goods sold

Operating Expenses

Loss from operations

Net Loss per common Share from continuing operations

For the nine months ended September 30, 2025 and 2024, the Company generated

net revenues in the amount of $24.2 million and $27.0 million, respectively.

The decrease between the nine-month periods was attributable

to the decrease in demand.

of Goods Sold

For the nine months ended September 30, 2025 and 2024, the Company recognized

a total of $17.1 million and $20.8 million, respectively, of cost of goods sold.

For the nine months ended September 30, 2025 and 2024, cost

of goods sold were 71% and 77% of net revenues, respectively.

Total operating expenses for the nine months ended September 30, 2025 and

2024 recognized was $8.4 million and $9.3 million, respectively, representing a 9.5% decrease.

The decreases are related to the cost reduction

plan put in place by management.

Research and Development –

Research and development expenses for the nine months ended September 30, 2025 and 2024 totaled $1.4 million and $1.3 million, respectively.

general and Administrative – Selling, general and administrative expenses for the nine months ended September 30, 2025

and 2024 totaled $6.2 million and $6.9 million, respectively, representing a 10.5% decrease.

The decreases are related to the cost reduction

plan put in place by management.

– Depreciation expenses for the nine months ended September 30, 2025, and 2024 totaled $53 thousand and $284 thousand,

respectively.

amortization – Intangible amortization expenses for the nine months ended September 30, 2025, and 2024 totaled $713 thousand

and $686 million, respectively.

The increase in loss from discontinued operations reflects transaction-related expenses and a one-time

loss on the sale of certain assets.

income (loss) – For the six months ended June 30, 2025, the Company recorded a net loss of $34 thousand, compared with a net

loss of $5.1 million for the six months ended June 30, 2024.

The significant improvement in net results was driven by higher margins

on continuing operations, lower operating expenses and the gain on debt settlement, partially offset by increased loss from discontinued

income and expenses

Interest Expense – Interest

expense for the nine months ended September 30, 2025 totaled $651 thousand, as compared to $820 thousand million for the nine months ended September

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

2 unchanged sentences

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

Cybersecurity

Management and Strategy

recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information

systems and protect the confidentiality, integrity, and availability of our data.

Material Risks & Integrated Overall Risk Management

have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture

of cybersecurity risk management.

This integration ensures that cybersecurity considerations are an integral part of our decision-making

processes at every level.

Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business

objectives and operational needs.

Third-party Risk

we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage

We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring

to ensure compliance with our cybersecurity standards.

The monitoring includes annual assessments of the SOC reports of our providers

and implementing complementary controls.

This approach is designed to mitigate risks related to data breaches or other security incidents

originating from third-parties.

from Cybersecurity Threats

have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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