Item 1. Financial Statements
ITEM
1. FINANCIAL STATEMENTS
OMNIQ
CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
June
30, 2026
December
31, 2025
(In
thousands, except share and per share data)
As
of
June
30, 2026
December
31, 2025
( UNAUDITED )
ASSETS
Current assets
Cash and cash
equivalents
$ 1,083
$ 679
Accounts receivable, net
8,200
9,536
Inventory
3,073
3,409
Prepaid expenses
1,206
786
Other current assets
37
52
Total
current assets
13,599
14,462
Property and equipment,
net of accumulated depreciation of $ 1,441 and $ 1,413 respectively
510
528
Goodwill
3,304
3,336
Trade name, net of accumulated
amortization of $ 5,442 and $ 5,334 , respectively
1,032
1,154
Customer relationships,
net of accumulated amortization of $ 13,763 and $ 13,474 , respectively
2,368
2,757
Other intangibles, net
of accumulated amortization of $ 2,056 and $ 2,038 , respectively
283
335
Right of use lease asset
2,369
1,656
Other assets
1,628
1,948
Total Assets
$ 25,093
$ 26,176
LIABILITIES AND STOCKHOLDERS’
(DEFICIT)
Current liabilities
Accounts payable and accrued
liabilities
$ 10,643
$ 11,232
Line of credit
1,784
1,342
Accrued payroll and sales
tax
1,491
1,649
Related party advances
7,301
3,767
Notes payable – related
party
919
919
Notes payable – current
portion
4,311
5,486
Notes payable
4,311
5,486
Lease liability –
current portion
659
373
Other current liabilities
1,706
2,933
Total
current liabilities
28,814
27,701
Long-term liabilities
Notes payable, less current
portion
883
530
Related party notes payable
8,267
8,690
Notes payable
8,267
8,690
Lease liability
1,537
1,237
Other long term liabilities
462
715
Total liabilities
39,963
38,873
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 outstanding, respectively
1
1
Preferred stock, value
1
1
Common stock; $ 0.001 par
value; 35,000,000 shares authorized; 15,152,930 and 15,102,930 shares issued and outstanding, respectively
15
15
Additional paid-in capital
113,595
113,592
Accumulated (deficit)
( 126,400 )
( 124,050 )
Accumulated other comprehensive
loss
( 2,081 )
( 2,255 )
Total
OmniQ stockholders’ equity (deficit)
( 14,870 )
( 12,697 )
Total liabilities and equity
(deficit)
$ 25,093
$ 26,176
The
accompanying unaudited notes should be read in 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)
2026
2025
2026
2025
For the three
months
For the Six
months ended
ending
June 30,
June
30,
(In
thousands, except share and per share data)
2026
2025
2026
2025
Revenues
$
7,375
$
7,802
$
15,055
$
15,782
Cost
of goods sold
5,855
5,821
11,280
11,618
Gross
profit
1,520
1,981
3,775
4,164
Operating
expenses
Research
& Development
626
556
1,104
969
Selling,
general and administrative
2,839
1,651
5,614
3,369
Depreciation
15
17
31
36
Amortization
257
237
513
468
Total
operating expenses
3,737
2,461
7,262
4,842
Loss
from operations
( 2,217
)
( 480
)
( 3,487
)
( 678
)
Other income (expenses):
Interest
expense
( 299
)
( 131
)
( 605
)
( 403
)
Other
(expenses) income
2,242
3,415
1,917
2,484
Gain
(Loss) on debt settlement
3
325
-
325
Total
other (income) expenses
1,946
3,609
1,312
2,406
Net Income (Loss) Before Income Taxes
( 271
)
3,129
( 2,175
)
1,728
Provision for Income Taxes
Current
( 257
)
( 72
)
( 257
)
( 37
)
Total
Provision for Income Taxes
( 257
)
( 72
)
( 257
)
( 37
)
Income
(loss) from continuing operations
( 528
)
3,057
( 2,432
)
1,691
Loss
from discontinued operations (net of tax)
-
( 1,002
)
-
( 1,725
)
Net
Income (Loss)
$
( 528
)
$
2,055
$
( 2,432
)
$
( 34
)
Net Income (Loss)
$
( 528
)
$
2,055
$
( 2,432
)
$
( 34
)
Foreign
currency translation adjustment
( 283
)
1,169
174
( 1,838
)
Comprehensive
income (loss )
( 811
)
3,224
$
( 2,258
)
$
( 1,872
)
Reconciliation of net income (loss)
to net income (loss) attributable to common shareholders
Net Income (Loss)
( 528
)
2,055
$
( 2,432
)
$
( 34
)
Less:
Dividends attributable to non-common stockholders’ of OmniQ Corp
( 8
)
( 8
)
( 15
)
( 14
)
Net
income (loss) attributable to common stockholders’ of OmniQ Corp
( 536
)
2,047
$
( 2,447
)
$
( 48
)
Net
income (loss) per share - basic attributable to common stockholders’ of OmniQ Corp
$
( 0.03
)
$
0.19
$
( 0.16
)
$
( 0.00
)
Net
income (loss) per share - diluted
$
( 0.03
)
$
0.15
$
( 0.16
)
$
( 0.00
)
Loss
from discontinued operations (net of tax)
$
-
$
( 1,002
)
$
-
$
( 1,725
)
Net
loss per share from discontinued operations
$
-
$
( 0.09
)
$
-
$
( 0.16
)
Weighted
average number of common shares outstanding - basic
15,140,705
10,712,930
15,140,705
10,712,930
Weighted average number of common shares outstanding – dilutive
15,140,705
13,616,997
15,140,705
10,712,930
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)
For
the Three and Six Months ended June 30, 2025 and 2026
(In
thousands)
Shares
Amount
Shares
Amount
Capital
Deficit
Income
(Loss)
(Deficit)
Series
C
Additional
Accumulated
Other
Total
Stockholders’
Preferred
Stock
Common
Stock
Paid-in
Accumulated
Comprehensive
Equity
(In
thousands)
Shares
Amount
Shares
Amount
Capital
Deficit
Income
(Loss)
(Deficit)
Balance,
December 31, 2024
502
$ 1
10,712
$ 11
$ 78,713
$ ( 123,899 )
$ 1,286
$ ( 43,888 )
Dividend
on Class C Shares
-
-
-
-
-
( 7 )
-
( 7 )
Stock-based
compensation – options, warrants, issuances
-
-
-
-
2
-
-
2
Cumulative
Translation Adjustment
-
-
-
-
-
-
491
491
Net
(loss) income
-
-
-
-
-
( 2,089 )
-
( 2,089 )
Balance,
March 31, 2025
502
$ 1
10,712
$ 11
$ 78,715
$ ( 125,995 )
$ 1,777
$ ( 45,491 )
Dividend
on Class C Shares
-
-
-
-
-
( 7
)
-
( 7
)
Sale
of assets from division
-
-
-
-
34,734
-
34,734
Stock-based
compensation – options, warrants, issuances
-
-
-
-
64
-
-
64
Cumulative
Translation Adjustment
-
-
-
-
-
-
( 2,329
)
( 2,329 )
Net
(loss) income
-
-
-
-
-
2,055
-
2,055
Balance,
June 30, 2025
502
$
1
10,712
$
11
$
113,513
$
( 123,947
)
$
( 552 )
$
( 10,974 )
Balance,
December 31, 2025
502
$ 1
15,102
$ 15
$ 113,592
$ ( 124,050 )
$ ( 2,255 )
$ ( 12,697 )
Dividend
on Class C Shares
-
-
-
-
-
( 7 )
-
( 7 )
Exercise
of stock option
-
-
50
-
2
-
-
2
Cumulative
Translation Adjustment
-
-
-
-
-
-
457
457
Net
(loss) income
-
-
-
-
-
( 1,904 )
-
( 1,904 )
Balance,
March 31, 2026
502
$ 1
15,152
$ 15
$ 113,594
$ ( 125,961 )
$ ( 1,798 )
$ ( 14,149 )
Balance
502
$ 1
15,152
$ 15
$ 113,594
$ ( 125,961 )
$ ( 1,798 )
$ ( 14,149 )
Dividend
on Class C Shares
-
-
-
-
-
( 7
)
-
( 7
)
Cumulative
Translation Adjustment
-
-
-
-
-
95
( 283
)
( 188
)
Rounding
-
-
-
-
1
1
-
2
Net
(loss) income
-
-
-
-
-
( 528
)
-
( 528
)
Balance,
June 30, 2026
502
$
1
15,152
$
15
$
113,595
$
( 126,400
)
$
( 2,081
)
$
( 14,870
)
Balance
502
$
1
15,152
$
15
$
113,595
$
( 126,400
)
$
( 2,081
)
$
( 14,870
)
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 FLOWS (UNAUDITED)
For
the Six Months Ended June 30,
(In thousands)
2026
2025
Cash flows from operations
Net loss
$ ( 2,432 )
$ ( 34 )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Stock-based compensation
-
66
Depreciation and amortization
582
569
Amortization of ROU asset
112
228
Loss from sale of other assets
-
Changes in operating assets and liabilities:
Accounts receivable
944
7,168
Prepaid expenses
( 418 )
331
Inventory
285
3,739
Other assets
71
70
Accounts payable and accrued liabilities
( 240 )
( 396 )
Accrued interest and accrued liabilities, related party
-
( 86
)
Accrued interest and accrued liabilities
-
( 86
)
Accrued payroll and sales taxes payable
( 372 )
726
Lease liability
( 235 )
( 220 )
Deferred tax assets, net
( 5 )
18
Other liabilities
2,585
( 6,107 )
Net cash provided by (used
in) operating activities - continuing
877
6,072
Net cash provided by (used in) operating activities
877
6,072
Cash flows from investing activities
Purchase of property and equipment
( 49 )
( 75 )
Cash paid for divestiture
919
( 2,388
)
Net cash (used in) investing
activities – continuing operations
870
( 2,463
)
Net cash (used in) investing
activities
870
( 2,463 )
Cash flows from financing activities
Net proceeds on exercise of options
3
-
Payments on notes/loans payable
( 2,669 )
( 2,686 )
Proceeds from draw on
line of credit
413
970
Net cash (used in) provided
by financing activities – continuing operations
( 2,253 )
( 1,716 )
Net cash (used in) provided
by financing activities
( 2,253 )
( 1,716 )
Net change in cash and cash equivalents
( 506
)
1,893
Effect of foreign exchange rates on cash and
cash equivalents
910
( 2,033 )
Cash and cash equivalents
at beginning of period
679
2,349
Cash and cash equivalents
at end of period
$ 1,083
$ 2,209
Non-cash activities:
Declared dividends payable
$ 7
$ 7
Right of use asset acquired in exchange for
lease liability
$ -
$ -
Cancelation of lease
$
-
471
Supplemental disclosure
of cash flow information:
Cash paid for interest
$ 362
$ 450
Cash paid for income taxes
$ -
$ -
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. 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, 2025 (the “2025 Form
10-K”).
We
describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in the 2025 Form 10-K. During
the six-month period ended June 30, 2026, there were no significant changes to those accounting policies other than below.
Recent
Accounting Pronouncements not yet adopted
In
November 2024, the FASB issued ASU 2025-03 “ Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures
(Subtopic 220-40) ” to improve the disclosures about an entity’s expenses. Upon adoption, we will be required to disclose
in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face
of the income statement. The standard is effective for our 2027 annual period, and our interim periods beginning in 2028, with early
adoption permitted. The standard can be applied either prospectively or retrospectively. We are currently assessing adoption timing and
the effect that the updated standard will have on our financial statement disclosures.
In
September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted
Improvements to the Accounting for Internal-Use Software . The standard changes when capitalization of internal-use software costs
begins and updates the related guidance for modern software development methods. The Company is evaluating the impact of this guidance
on the timing of capitalization, amortization, and related disclosures. The standard is effective for annual periods beginning after
December 15, 2027, including interim periods within those annual periods, with early adoption permitted.
Net
Income (Loss) Per Common Share
Net
income (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 six-months ended June 30, 2026, and 2025 were 15,140,705
and 10,712,930 ,
respectively. For the three months ended June 30, 2026 and 2025 the shares were 15,140,705 and 13,616,997 . 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 EARNINGS PER SHARE
June
30, 2026
June 30, 2025
Options to purchase common stock
2,027,833
2,126,833
Warrants to purchase common
stock
6,792,568
959,235
Potential shares excluded
from diluted net loss per share
8,820,401
3,086,068
For
the three months ended June 30, 2025, the weighted average number of shares included the options and warrants to purchase common stock.
F- 5
NOTE
2 – GOING CONCERN
The
accompanying condensed 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 $ 15.2 million as of June 30, 2026
●
Accumulated
deficit of $ 126.4 million as of June 30, 2026
●
Multiple
years of losses from operations
Management
Evaluation
Management
considers the conditions outlined above as the most significant factors in raising substantial doubt about the Company’s ability
to continue as a going concern within one year after the date the financial statements are issued.
Management’s
Plans to Mitigate and Alleviate Conditions or Events
●
Management
is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations.
●
Management
has placed a strategic focus on increasing sales with prime customers.
●
Sales
efforts are focused on the most profitable product lines.
●
The
Company has implemented an aggressive debt settlement plan with its vendors and debt holders
to clean up the Balance Sheet presentation and during 2025, the Company was able to settle
many debts for a discount.
●
Short
term liabilities for the Company decreased from $ 86.3 million to roughly $ 27.7 million, showing the efforts of management are working.
●
In
December 2025 management finalized an equity raise which resulted in approximately $ 941,000 net cash received from investors.
NOTE
3 – CONCENTRATIONS
For
the six-months ended June 30, 2026, and the year ended December 31, 2025, no customer accounted for more than 10 % of the Company’s
consolidated revenues from continuing operations.
Accounts
receivable at June 30, 2026 and December 31, 2025 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 June 30, 2026, and 11.2 % as of December 31, 2025.
For
the six months ended June 30, 2026, and the year ended December 31, 2025 one vendor made up 45 % and 45 %, respectively, of our purchases.
NOTE
4 – INVENTORY
Inventory
consisted of the following as of:
SCHEDULE OF INVENTORY
In thousands
June 30, 2026
December
31, 2025
Raw materials
$ 265
$ 283
Inventory in transit
397
440
Finished goods (less allowance)
3,352
3,409
Less allowance for obsolescence
( 941 )
( 723 )
Total inventories
$ 3,073
$ 3,409
NOTE
5 – RELATED PARTY NOTES PAYABLE
Concurrent
with the sale of the Quest Solution division, the company entered into a Transition Services Agreement whereas the costs for some employees
would be split during the transition. Connected to that was advances to OMNIQ from the Buyer to facilitate the transition. This entity
is majority controlled by the Company’s CEO and thus treated as related party advances. The balance as of December 31, 2025 was
$ 3.8 million and at June 30, 2026 was $ 7.3 million. This is non-interest bearing with no predefined or agreed upon repayment term.
F- 6
In
addition and concurrent with the sale of the Quest Solution division, the Company entered into a Promissory Note which bears interest
at 5 % per annum, is amortized over a ten-year period, and provides for a balloon payment after the third year. The balance at December
31, 2025 was $ 9.6 million and at June 30, 2026 was $ 9.2 million.
SCHEDULE
OF RELATED PARTY NOTES PAYABLE
In thousands
June 30, 2026
December
31, 2025
Related Party Notes Payable - other
$ 9,186
$ 9,609
Less current portion of
related party note payable
( 919 )
( 919 )
Long Term Notes Payable
– related party
$ 8,267
$ 8,690
NOTE
6 – OTHER NOTES PAYABLE
SCHEDULE OF OTHER NOTES PAYABLE
(In
thousands)
June
30, 2026
December
31, 2025
Note payable other
5,194
6,016
Less current portion
( 4,311 )
( 5,486 )
Long-term notes payable
$ 883
$ 530
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 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 At December 31, 2025, the balance owed is $ 437,500
USD and at June 30, 2026, the balance owed is approximately $ 332,500
USD.
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.
This was completed in January 2025.
During
the year ended December 31, 2023, the Company entered into a short-term loan Hapoalim Bank totaling NIS $ 5.5 million, approximately US
$ 1.5 million. The note accrues interest at 7.3 % per annum. The loan is renewed every month at Israeli Prime Rate plus + 1.3 %, which at
June 30, 2026 was 7.05 % and at December 31, 2025 was 7.05 %.
In
February 2024, NIS $ 1.5 million of the loan was converted into a short-term loan to be repaid in 12 instalments, bearing interest at
Prime + 1.5 %.
In
July 2024, an additional $ 1.5 million was converted into a long-term loan to be repaid in 18 instalments, bearing interest at a rate
of Prime + 1.5 %.
In
December 2025, an additional $ 0.8 million was converted into a long-term loan to be repaid in 12 instalments, bearing interest at a rate
of Prime + 2.2 %, the balance at December 31, 2025 was still $ 0.8 million and at June 30, 2026 was $ 0.4 million.
At
December 31, 2025, the Company owed Hapoalim Bank USD $ 1.39 million. At June 30, 2026, the balance was approximately $ 0.81 million.
During
the year ended December 31, 2023, the Company entered into a short-term loan from Bank Leumi totaling NIS $ 21.5 million, approximately
US $ 5.9 million. The note accrues interest at 7.6 % per annum. The loan is renewed every month at Israeli Prime Rate plus 1.89 %, which
at December 31, 2025 was 7.64 % and at June 30, 2026 was 7.39 %.
In
March 2024, NIS $ 7.5 million of the loan was converted into a long-term loan to be repaid in 36 installments, bearing interest at a rate
of Prime + 3.25 %, which at December 31, 2025 was 9.0 % which at June 30, 2026 was 8.75 %.
In
June 2025 the Company decreased the balance of the revolving loan by further NIS $ 4 million.
F- 7
The
short-term loan (renewed every month) at 2025 is NIS 10 million, approximately US $ 3.138 million.
At
December 31, 2025, the Company owed Bank Leumi USD $ 4.138 million. At June 30, 2026, the Company owed Bank Leumi approximately USD $ 3.85
million.
On
September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling $ 1.5 M NIS, approximately US $ 393 thousand.
The note accrues interest at the Israeli Prime Rate plus 3.5 % which currently equals 9 % per annum and is payable in 36 monthly installments.
The balance at December 31, 2025 is $ 130 thousand and at June 30, 2026 was $ 70 thousand.
As
of June 30, 2026, 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. On December 29, 2025, a new covenants agreement was signed with
Bank Hapoalim, pursuant to which the Company is required to comply with the financial covenants set forth in the new agreement, commencing
with the 2026 financial statements.
As
part of the sale of the Quest division and its assets, the Company entered into a Promissory Note which bears interest at 5 %
per annum, is amortized over a 10 ten-year
period, and provides for a balloon payment after the third year. The balance at June 30, 2026 was $ 9.2
million. Due to the related party nature of the CEO of OMNIQ relationship with the Note Holder, this note is deemed related
party.
NOTE
7 – STOCKHOLDERS’ EQUITY
PREFERRED
STOCK
Series
A
As
of June 30, 2026 and December 31, 2025, 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 13 common shares.
Series
B
As
of June 30, 2026 and December 31, 2025, there was 1
preferred share designated and no
preferred shares outstanding.
Series
C
As
of June 30, 2026 and December 31, 2025, 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
June 30, 2026, the accrued dividends on the Series C Preferred Stock was $ 241
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.
During
the six months ended June 30, 2026, the Company issued 50,000 shares upon exercise and receipt of funds for stock options. The proceeds
received were $ 3,000 .
F- 8
NOTE
8 – LITIGATION
On
November 3, 2024 a commercial real estate company filed a lawsuit against Dangot Computers, OMNIQ Technologies and some of Dangot’s
officers alleging breach of a letter of intent for a lease arrangement. The claims were brought in an Israeli court. The initial claim
against Dangot Computers is NIS 21 million approximately US $ 5.6 million. As of July 2026, this case has been settled for approx. USD$
525,000 , to be paid over a 4 year period.
In
March 2025, the Company was named a defendant in a case involving a consultant who was terminated and who claims he is owed approximately
$ 389,000 in unpaid fees and commissions. The Company believes it has multiple defenses and cross claims against the former consultant
and is evaluating its response to the lawsuit, but plans to vigorously defend the suit.
On
June 30, 2025, the Company’s subsidiary Dangot Computers reached at settlement with one of its vendors in Israel related to past
due rebates and price protection payments entitled under prior agreements. The vendor agreed to pay Dangot Computers, approximately USD
$ 1.2 million, based on certain milestones related to additional purchases. These payments are being treated as reduction in Cost of Goods
sold upon receipt from the Vendor. As of December 31, 2025, the full amount had been received from the vendor.
During
2025, several companies filed third-party and fourth-party claims against our subsidiary, Dangot Computers alleging patent infringement.
In the opinion of Dangot’s legal counsel, at this preliminary stage it is not yet possible to assess the likelihood of the claims;
therefore, no provision has been recorded in the Company’s financial statements in connection with this matter.
NOTE
9 – BUSINESS SEGMENT
The
Company operates in a single reportable segment, referred to as providing solutions including hardware, software, communications, and
automated management service as an established distributor of barcode labels, tags, and ribbons, as well as RFID labels and tags. The
business is managed by the chief executive officer who is the Chief Operating Decision Maker (CODM). The CODM evaluates segment performance
based on operating income (loss) for purposes of allocating resources and evaluating financial performance. The accounting policies of
our single reportable segment are the same as those for the Company as a whole.
NOTE
10 – DISCONTINUED OPERATIONS
As
discussed in the Form 10K filed April 15, 2026, and the relevant Form 8-K, on July 11, 2025, OMNIQ Corp., a Delaware corporation (the
“Company”), together with its subsidiaries, Quest Marketing, Inc., HTS Image Processing, Inc., OmniQ Vision Inc., HTS Image
Ltd., OmniQ Technologies Ltd., and Dangot Computers, Ltd. (collectively, the “Sellers”), entered into an Asset Purchase Agreement
(the “Purchase Agreement”) with Summit Junction Holdings LLC, a Delaware limited liability company (the “Buyer”).
Pursuant
to the Purchase Agreement, the Sellers agreed to sell, and Buyer agreed to purchase, substantially all of the assets and assume certain
liabilities mainly associated with the Company’s legacy business line, including its integrated hardware, software, and automation
solutions business, (the “Transferred Business”). The Transaction was consummated on July 11, 2025. Although the Purchase
Agreement is dated as of June 30, 2025, the parties executed the agreement and consummated the Transaction on July 11, 2025.
The
aggregate consideration for the Transaction is approximately $ 45.0 million, consisting of the assumption by Buyer of up to $ 55.0 million
in specified liabilities of the Transferred Business and the issuance by the Company of a Promissory Note in the principal amount of
$ 10.0 million in favor of the Buyer. The Promissory Note bears interest at 5 % per annum, is amortized over a ten-year period, and provides
for a balloon payment after the third year. In addition, the Company is entitled to a contingent payment of up to $ 10.0 million in the
event that, within 18 months following the closing, Buyer either (i) consummates a sale of all or substantially all of its assets or
equity for consideration in excess of $ 100.0 million or (ii) completes an initial public offering at a valuation exceeding $ 100.0 million.
The
assets sold include, among other things, accounts receivable, inventory, tangible personal property, intellectual property, contract
rights, books and records, and other assets used or held for use in connection with the Transferred Business. Certain assets were excluded
from the Transaction, including the Company’s cash and cash equivalents and all assets not related to the Transferred Business.
Buyer assumed only those liabilities specified in the Purchase Agreement, and the Company retained all other liabilities, including those
unrelated to the Transferred Business or expressly excluded.
The
Purchase Agreement contains customary representations, warranties, and covenants, including pre-closing operating covenants, post-closing
indemnification provisions, and certain limitations on liability. The Transaction and Purchase Agreement were approved by the Company’s
Board of Directors effective June 30, 2025 following completion of a fairness opinion, dated June 27, 2025, from an independent financial
advisor.
In
connection with the closing, the Company and Buyer entered into and delivered various ancillary agreements, including a Bill of Sale,
Assignment and Assumption Agreement, Trademark Assignment Agreement, Promissory Note, Intellectual Property License Agreement, and Transition
Services Agreement. The Company also entered into a consent agreement with its largest vendor Bluestar to consent to the transfer of
the liabilities owed to it from the Company to the Buyer. Due to an entity affiliated with Shai Lustgarten, the Company’s CEO as
a principal member of the Buyer, the transaction is deemed related party.
Pursuant
to his employment contract, the CEO, Shai Lustgarten is entitled to a bonus equal to 4 % of a total transaction price and pursuant to
that, the Board of Directors awarded a bonus of $ 1.72 million to Mr. Lustgarten.
Based
on ASC 850-10, ASC 845-10, ASC 820, and SEC Staff Accounting Bulletin Topics 5.G, 5.T, and 1.B.1, the transaction represents a capital
contribution from the CEO to the Company. While a fairness opinion was obtained, it does not fully satisfy ASC 820 fair value measurement
requirements for full recognition. Accordingly, the $ 34 million gain is recorded directly to equity as a capital contribution. This conclusion
aligns with both the letter and the spirit of applicable GAAP and SEC guidance.
The
sale resulted in a net gain on disposal of approximately $ 33.8 million, net of tax, which reflects the difference between the carrying
amount of the net assets disposed of and the consideration transferred/assumed, including the promissory note and transaction costs.
However, due to the related-party nature of the transaction, management determined to record the gain to Additional Paid-in Capital.
F- 9
The
net gain (APIC) was calculated as follows (in thousands):
SCHEDULE OF NET GAIN ON ADDITIONAL PAID IN CAPITAL
Reduction of cash and cash equivalents
$ ( 2,388 )
Reduction of accounts receivable, net
( 4,730 )
Reduction of inventory, net
( 282 )
Reduction of other current assets
( 996 )
Reduction in property and equipment, net
of accumulated depreciation
( 48 )
Reduction in accounts payable and accrued
liabilities
55,000
Increase in other current liabilities
( 1,808 )
Increase in related party notes payable
( 10,000 )
Increase in additional paid-in capital
$ ( 34,748 )
Income Taxes Payable on transaction
$ 960
Additional paid-in capital reduction
$ 960
Details
of net income (loss) from discontinued operations , net of taxes, are as follows (in thousands):
SCHEDULE OF DISCONTINUED OPERATIONS
For the six months ended
June
30, 2026
June
30, 2025
Revenues
$ -
$ 24,599
Cost of goods sold
-
19,115
Selling, general and administrative
-
7,281
Research & Development
-
40
Depreciation
-
14
Amortization
-
-
Interest expense
-
1,050
Other expenses (income)
-
( 1,176 )
Current tax
-
-
Net Income (Loss) from Discontinued Ops
(Net of Tax)
$ -
$ ( 1,725 )
For the three months ended
June
30, 2026
June
30, 2025
Revenues
$ -
$ 12,675
Cost of goods sold
-
10,149
Selling, general and administrative
-
4,082
Research & Development
-
18
Depreciation
-
11
Amortization
-
-
Interest expense
-
848
Other expenses (income)
-
( 1,431 )
Current tax
-
-
Net Income (Loss) from Discontinued Ops
(Net of Tax)
$ -
$ ( 1,002 )
Because
the transaction was effective June 30, 2025, no assets or liabilities disposed in the sale were included on the balance sheet as of December
31, 2025. The balances of the disposed assets and liabilities as of December 31, 2024 were as follows:
Assets
Current Assets
Accounts receivable, net
$ 10,608
Inventory, net
4,197
Prepaid expenses
482
Other current assets
61
Total current assets
15,348
Property and equipment, net of accumulated
depreciation
8
Right of use lease asset
471
Total Assets
$ 15,827
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities
$ 56,863
Accrued payroll and sales tax
1,490
Lease liability – current portion
103
Other current liabilities
206
Total Current Liabilities
58,662
Deferred revenue
5,891
Lease liability
178
Total liabilities
$ 64,731
Cash
flows related to the discontinued business have not been segregated and are included in the condensed consolidated statements of cash
flows. The following table provides supplemental cash-flow information for the discontinued operations (in thousands):
SCHEDULE OF SUPPLEMENTAL CASH-FLOW INFORMATION FOR DISCONTINUED OPERATIONS
Six
months ended
June 30, 2026
Six
months ended
June 30, 2025
Depreciation and amortization
-
( 2,304 )
Capital expenditures
-
( 771 )
Other significant non-cash items
Cancelation of lease
-
471
NOTE
11 – SUBSEQUENT EVENTS
On
November 3, 2024 a commercial real estate company filed a lawsuit against Dangot Computers, OMNIQ Technologies and some of Dangot’s
officers alleging breach of a letter of intent for a lease arrangement. The claims were brought in an Israeli court. The initial claim
against Dangot Computers is NIS 21 million approximately US $ 5.6 million. In July 2026, the case was settled for approx. USD$ 525,000 ,
to be paid over a 4 year period.
As
of August 14, 2026, there are no other material subsequent events that have occurred.
F- 10
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.