What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-20 compared with 2025-11-14 · 60 added, 107 removed, 72 unchanged (70% of the section changed)

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a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our 2025

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

Form 10-K and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended March 31,

2026, as well as other reports and registration statements filed by us with the SEC.

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about us and the announcements we make from time to time, visit our website at www.omniq.com.

2008 to 2013, we were in the business of developing oil and gas reserves.

In January 2014, we determined it was in the best interest

of our stockholders to focus on operating companies with a track record of positive cash flows and larger existing revenue bases.

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

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

Solutions, Inc.

(January 2014)

Code Specialties, Inc.

(November 2014)

Image Processing, Inc.

(October 2018)

Consulting LLC.

(February 2020)

Computers Ltd.

use patented and proprietary artificial intelligence (AI) technology to deliver machine vision image processing solutions including data

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

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.

Company’s sales from operations for the three months ended March 31, 2026, were $7.7 million, a decrease of approximately $299

thousand or 4%, over the three months ended March 31, 2025.

loss from operations for the three months ended March 31, 2026, was $1.26 million, an increase of $841 thousand compared with the loss in

the three months ended March 31, 2025, of $425 thousand.

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

31, 2026, was ($0.13) versus ($0.19) per share for the same period in 2025.

Comprehensive loss for the three months ended March 31, 2026

and 2025 was $1.7 million and $1.6 million respectively, the only component to comprehensive loss besides net loss is foreign currency

AND CAPITAL RESOURCES

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 March 31, 2026, the Company had cash in the amount of $787 thousand and a working capital deficit of $14.6 million, compared to cash

in the amount of $679 thousand, and a working capital deficit of $13.2 million as of December 31, 2025.

The Company had stockholders’

deficit attributable to OmniQ stockholders of $14.1 million and $12.7 million as of March 31, 2026, and December 31, 2025, respectively.

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

Company’s accumulated deficit was $125.7 million and $124 million as of March 31, 2026, and December 31, 2025.

Company’s operations provided (used) net cash of $70 thousand and provided $1 million in the three months ended March 31,

2026, and 2025, respectively.

The decrease in cash provided in operations of $1 million is due to the decrease in

Company’s cash used in investing activities was $26 thousand for the three months ended March 31, 2026, compared to cash used

in investing activities of $31 thousand for the three months ended March 31, 2025.

Company’s financing activities used $0.68 million of cash during the three months ended March 31, 2026, and used $1.2 million during

the three months ended March 31, 2025.

of Operations

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

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

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

Three months ended September 30,

For the Three months ended

Cost of Goods sold

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Net Loss per common Share from continuing operations

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.

the three months ended March 31, 2026, and 2025, the Company generated net revenues in the amount of $7.7 million and $7.9 million, respectively.

The decrease between the three-month periods was attributable to timing of projects by customers.

of Goods Sold

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.

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

and $228 thousand, respectively.

income and expenses

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.

the three months ended March 31, 2026, and 2025, the Company recognized a total of $5.4 million and $5.8 million, respectively, of cost

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.

For the three months ended March 31, 2026, and 2025, cost of goods sold were 70% and 73% of net revenues, respectively.

operating expenses for the three months ended March 31, 2026, and 2025 recognized was $3.5 million and $2.6 million, respectively, representing

a 35% increase.

The increase in operating expenses was due primarily to increase costs in selling and general administrative expenses, specifically salaries.

and Development – Research and development expenses for the three months ended March 31, 2026, and 2025 totaled $478 thousand

and $485 thousand, respectively.

general and Administrative – Selling, general and administrative expenses for the three months ended March 31, 2026, and

2025 totaled $2.7 million and $1.9 million, respectively, representing a 48% increase.

The increase was due primarily to increased

costs for selling and general administrative expenses.

– Depreciation expenses for the three months ended March 31, 2026, and 2025 totaled $16 thousand and $26 thousand, respectively,

representing a 38% decrease.

The decrease is directly related to the reduction in fixed assets.

amortization – Intangible amortization expenses for the three months ended March 31, 2026, and 2025 totaled $256 thousand

and $232 thousand, respectively.

The increase is due to life of intangibles and what is remaining to be amortized.

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

Expense – Interest expense for the three months ended March 31, 2026, totaled $306 thousand, as compared to $260 thousand

for the three months ended March 31, 2025.

The increase is primarily attributable to the line of credit.

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

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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