OMNIQ Corp. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by, or that include the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend”, “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs, and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new marketing applications, the timing and cost of planned capital expenditures, competitive conditions, and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results may not be indicative of results or developments in subsequent periods. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following: ● Our ability to raise capital when needed and on acceptable terms and conditions; ● Our ability to manage credit and debt structures from vendors, debt holders, and secured lenders. ● Our ability to manage the growth of our business through internal growth and acquisitions; ● Competitive pressures; ● Our ability to attract and retain management, and to integrate and maintain technical information and management information systems. ● Compliance with laws and regulations, including those relating to environmental matters, corporate governance matters and tax matters, as well as any future changes to such laws and regulations; and For 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 June 30, 2026, as well as other reports and registration statements filed by us with the SEC. These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q and our other public filings. For more information about us and the announcements we make from time to time, visit our website at www.omniq.com. Introduction From 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. Our strategy developed into leveraging management’s relationships in the business world for investments for us. Since 2014, we have made the following acquisitions resulting in us becoming a leading provider of computerized and machine-vision image-processing solutions: ● Quest Solutions, Inc. (January 2014) ● Bar Code Specialties, Inc. (November 2014) ● HTS Image Processing, Inc. (October 2018) ● EyepaxIT Consulting LLC. (February 2020) ● Dangot Computers Ltd. (July 2021) We use patented and proprietary artificial intelligence (AI) technology to deliver machine vision image processing solutions including data collection, real-time surveillance and monitoring for supply chain management, homeland security, public safety, traffic & parking management, and access control applications. 3 The technology and services we provide help our clients move people, assets, and data safely and securely through airports, warehouses, schools, national borders, and many other applications and environments. Our principal solutions include hardware, software, communications, and automated management services, technical service and support. Our highly tenured team of professionals has the knowledge and expertise to simplify the integration process for our customers. We deliver practical problem-solving solutions backed by numerous customer references. Our customers include government agencies, healthcare, universities, airports, municipalities and more. We currently engage with several billion-dollar markets with double-digit growth, including the Global Safe City market and the Ticketless Safe Parking market. The following is a discussion of our financial condition, results of operations, financial resources, and working capital. This discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements contained in this Form 10-Q. OVERVIEW The Company’s sales from operations for the six months ended June 30, 2026, were $15 million, a decrease of approximately $727 thousand or 4%, over the six months ended June 30, 2025. The loss from operations for the six months ended June 30, 2026, was $3.5 million, an increase of $2.4 million compared with the loss in the six months ended June 30, 2025, of $678 thousand. Basic loss per share from continuing operations for the six months ended June 30, 2026, was ($0.16) versus ($0.00) per share for the same period in 2025. Comprehensive loss for the six months ended June 30, 2026 and 2025 was $2.5 million and $1.9 million respectively, the only component to comprehensive loss besides net loss is foreign currency translation. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2026, the Company had cash in the amount of $1.1 million and a working capital deficit of $15.2 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 $14.9 million and $12.7 million as of June 30, 2026, and December 31, 2025, respectively. This increase in our stockholders’ deficit was primarily attributable to net losses. The Company’s accumulated deficit was $126.4 million and $124 million as of June 30, 2026, and December 31, 2025. The Company’s operations provided net cash of $877 thousand and provided $6.1 million in the six months ended June 30, 2026, and 2025, respectively. The decrease in cash provided in operations of $5.2 million is due to the decrease in revenue. The Company’s cash provided in investing activities was $870 thousand for the six months ended June 30, 2026, compared to cash used in investing activities of $2.5 million for the six months ended June 30, 2025. The Company’s financing activities used $2.3 million of cash during the six months ended June 30, 2026, and used $1.7 million during the six months ended June 30, 2025. Results of Operations – for the 6 months ended The following tables set forth certain selected unaudited condensed consolidated statements of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance. For the 6 months ended June 30, Variation In thousands 2026 2025 $ % Revenue $ 15,055 $ 15,782 $ (727 ) (4.61 )% Cost of Goods sold 11,280 11,618 (338 ) (2.91 )% Gross Profit 3,775 4,164 (389 ) (9.34 )% Operating Expenses 7,262 4,842 2,420 49.98 % Income (Loss) from operations (3,487 ) (678 ) (2,809 ) 414.31 % Net income (loss) from continuing operations (2,432 ) 1,691 (4,123 ) (243.83 )% Loss from discontinued operations (net of tax) - (1,725 ) 1,725 100.00 % Net income (loss) (2,432 ) (34 ) (2,398 ) 7,0535 % Net Loss per common Share from continuing operations $ (0.16 ) $ (0.0 ) $ 0.16 100.00 % 4 Revenues For the six months ended June 30, 2026, and 2025, the Company generated net revenues in the amount of $15 million and $15.8 million, respectively. The decrease between the six-month periods was attributable to timing of projects by customers. In addition, the strengthening of the Israeli Shekel during the quarter resulted in the decrease in sales to be less in the USD presentation currency. Cost of Goods Sold For the six months ended June 30, 2026, and 2025, the Company recognized a total of $11.3 million and $11.6 million, respectively, of cost of goods sold. For the six months ended June 30, 2026, and 2025, cost of goods sold were 75% and 74% of net revenues, respectively. Operating expenses Total operating expenses for the six months ended June 30, 2026, and 2025 recognized was $7.3 million and $4.8 million, respectively, representing a 50% increase. The increase in operating expenses was due primarily to increase costs in selling and general administrative expenses, specifically salaries. Research and Development – Research and development expenses for the six months ended June 30, 2026, and 2025 totaled $1.1 million and $969 thousand, respectively. Selling, general and Administrative – Selling, general and administrative expenses for the six months ended June 30, 2026, and 2025 totaled $5.6 million and $3.4 million, respectively, representing a 66% increase. The increase was due primarily to increased costs for selling and general administrative expenses. Depreciation – Depreciation expenses for the six months ended June 30, 2026, and 2025 totaled $31 thousand and $36 thousand, respectively, representing a 14% decrease. The decrease is directly related to the reduction in fixed assets. Intangible amortization – Intangible amortization expenses for the six months ended June 30, 2026, and 2025 totaled $513 thousand and $468 thousand, respectively. The increase is due to life of intangibles and what is remaining to be amortized. Other income and expenses Interest Expense – Interest expense for the six months ended June 30, 2026, totaled $605 thousand, as compared to $403 thousand for the six months ended June 30, 2025. The increase is primarily attributable to the line of credit. Results of Operations – for the 3 months ended The following tables set forth certain selected unaudited condensed consolidated statements of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance. For the 3 months ended June 30, Variation In thousands 2026 2025 $ % Revenue $ 7,375 $ 7,802 $ (427 ) (5.47 )% Cost of Goods sold 5,855 5,821 34 0.58 % Gross Profit 1,520 1,981 (461 ) (23.27 )% Operating Expenses 3,737 2,461 1,276 51.85 % Income (Loss) from operations (2,217 ) (480 ) (1,737 ) 361.88 % Net income (loss) from continuing operations (528 ) 3,057 (3,585 ) (117.27 )% Loss from discontinued operations (net of tax) - (1,002 ) 1,002 (100.00 )% Net income (loss) (528 ) 2,055 (2,583 ) (125.69 )% Net Loss per common Share from continuing operations $ (0.03 ) $ 0.19 $ (0.22 ) (118.35 )% 5 Revenues For the three months ended June 30, 2026, and 2025, the Company generated net revenues in the amount of $7.4 million and $7.8 million, respectively. The decrease between the three-month periods was attributable to timing of projects by customers. In addition, the strengthening of the Israeli Shekel during the quarter resulted in the decrease in sales to be less in the USD presentation currency. Cost of Goods Sold For the three months ended June 30, 2026, and 2025, the Company recognized a total of $5.9 million and $5.8 million, respectively, of cost of goods sold. For the six months ended June 30, 2026, and 2025, cost of goods sold were 79% and 75% of net revenues, respectively. Operating expenses Total operating expenses for the three months ended June 30, 2026, and 2025 recognized was $3.7 million and $2.5 million, respectively, representing a 52% increase. The increase in operating expenses was due primarily to increase costs in selling and general administrative expenses, specifically salaries. Research and Development – Research and development expenses for the three months ended June 30, 2026, and 2025 totaled $626 thousand and $556 thousand, respectively. Selling, general and Administrative – Selling, general and administrative expenses for the three months ended June 30, 2026, and 2025 totaled $2.8 million and $1.7 million, respectively, representing a 72% increase. The increase was due primarily to increased costs for selling and general administrative expenses. Depreciation – Depreciation expenses for the three months ended June 30, 2026, and 2025 totaled $15 thousand and $17 thousand, respectively, representing a 12% decrease. The decrease is directly related to the reduction in fixed assets. Intangible amortization – Intangible amortization expenses for three six months ended June 30, 2026, and 2025 totaled $257 thousand and $237 thousand, respectively. The increase is due to life of intangibles and what is remaining to be amortized. Other income and expenses Interest Expense – Interest expense for the three months ended June 30, 2026, totaled $299 thousand, as compared to $131 thousand for the six months ended June 30, 2025. The increase is primarily attributable to the line of credit. Inflation The Company’s results of operations have not been materially affected by inflation and management does not expect inflation to have a material impact on its operations in the future. Off- Balance Sheet Arrangements The Company currently does not have any off-balance sheet arrangements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable