What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 111 added, 124 removed, 198 unchanged (54% of the section changed)

9 unchanged sentences

in these forward-looking statements as a result of certain factors.

Company’s consolidated revenue for the year ended December 31, 2023 were $81.2 million, representing a decrease of $19.6 million

The Company’s consolidated revenue for the year ended December 31, 2024 were $73.6 million, representing a decrease of $7.6 million

from the year ended December 31, 2023 of $81.2 million.

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Codification Topic 606, Revenue from Contracts with Customers (“Topic 606”).

loss attributable to common stockholders’ of OMNIQ Corp was $29.5 million in 2023, an increase of $15.7 million from the 2022 loss

Net loss attributable to common stockholders’ of OMNIQ Corp was $10 million in 2024, a decrease of $19.5 million from the 2023 loss

of $29.5 million.

Basic loss per share attributable to common stockholders was $3.50 for the year 2023 compared to $1.82 per share for

the year 2022.

Basic loss per share attributable to common stockholders was $0.94 for the year 2024 compared to $3.50 loss per share

for the year 2023.

April 1, 2022, the Company closed on its acquisition of Dangot and exercised the remaining portion of its option to purchase 23.0% of

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The Company utilized its working capital and a combination of short- and long-term loans.

following are the principal conditions or events which potentially raise substantial doubt about the company’s ability to continue

as a going concern:

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

the need for operational cash with the need to add additional products.

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Star - The Company’s total accounts payable due to Blue Star as of December 31, 2024, was approximately $53.6 million.

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.

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 five years.

has enjoyed a good mutual relationship for the past five years.

finalized a new line of credit with an additional financial institution.

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

the year ended December 31,

the year ended

Cost of Goods sold

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Loss from operations

Net Loss per common Share from continuing operations

for the years ended December 31, 2023 and 2022 were generated from the sales of hardware, service contracts, software, labels and ribbons,

and related services provided by the Company to its customers.

For the years ended December 31, 2023 and 2022, the Company recognized

$81.2 million and $100.8 million in net revenues, respectively.

This represents a decrease of 19%.

Net Loss per common Share

from continuing operations

for the years ended December 31, 2024 and 2023 were generated from the

sales of hardware, service contracts, software, labels and ribbons, and related services provided by the Company to its customers.

the years ended December 31, 2024 and 2023, the Company recognized $73.6 million and $81.2 million in net revenues, respectively.

represents a decrease of 9%.

The decrease was due to two main factors:

(1) The decrease in deliverables due to the war in Israel, and (2) a delay in the timing of a significant software project.

(1) The decrease in deliverables, and (2) a delay in the timing

of a significant customer project.

of Goods Sold

the years ended December 31, 2023 and 2022, the Company recognized a total of $65 million and $78.7 million, respectively, of cost of

Cost of goods sold was 81% of revenues for 2023 and 78% of revenue for 2022.

Our gross margin percentage has remained relatively

stable in an industry that is experiencing gross-margin pressure.

the years ended December 31, 2023 and 2022, operating expenses were $41.9 million and $31.7 million, respectively.

This represents an

increase of $10.2 million, or 32%, which is due to impairment expense of $14.7 million.

The following explains in detail the change in

operating expenses.

& Development – Research and development for the years ended December 31, 2023 and 2022 totaled $2.2 million and $1.8

million, respectively.

This represents an increase of $328 thousand or 18%, which is due to investment in developing additional software.

General and Administrative – Selling, General and Administrative expenses were $23 million for the year ended December

31, 2023, compared to $27.7 million for the year ended December 31, 2022, representing a decrease of $4.7 million, or 17%.

was due to a decrease in commissions as a result of lower sales and management’s efforts to cut costs.

– Depreciation for the year ended December 31, 2023 was $464 thousand compared to $324 thousand for the year ended December

This represents an increase of $140 thousand, or 43%, attributable to growth in fixed assets.

Amortization – Intangible amortization expense for the year ended December 31, 2023 was $1.6 million, compared to $1.8

million for the year ended December 31, 2022.

of Goodwill – During the year ended December 31, 2023 the Company experienced significant decline in our stock price and

sustained losses from operations.

Therefore, we completed a quantitative goodwill impairment analysis as of December 31, 2023.

of the analysis indicated an impairment loss for goodwill related to acquisitions prior to 2021, and we recorded a non-cash impairment

of $14.7 million.

the years ended December 31, 2024 and 2023, the Company recognized a total

of $58 million and $65 million, respectively, of cost of goods sold.

Cost of goods sold was 79% of revenues for 2024 and 81% of revenue

Our gross margin percentage has remained relatively stable in an industry that is experiencing gross-margin pressure.

the years ended December 31, 2024 and 2023, operating expenses were $22.3

million and $41.9 million, respectively.

This represents a decrease of $19.6 million, or 47%, which is due to impairment expense of $14.7

million in 2023.

The following explains in detail the change in operating expenses.

& Development – Research and development for the years ended December 31, 2024 and 2023 totaled

$1.5 million and $2.2 million, respectively.

This represents an decrease of $657 thousand or 31%, which is due to reduction in costs for developing software.

General and Administrative – Selling, General and Administrative expenses were $19.5 million for the year ended

December 31, 2024, compared to $23 million for the year ended December 31, 2023, representing a decrease of $3.5 million, or 15%.

change was due to management’s efforts to cut costs.

– Depreciation for the year ended December 31, 2024 was $364 thousand compared to $464

thousand for the year ended December 31, 2023.

This represents a decrease of $100 thousand, or 22%, attributable to reduction in fixed

Amortization – Intangible amortization expense for the year ended December 31, 2024 was $915 thousand,

compared to $1.6 million for the year ended December 31, 2023.

of Goodwill – During the year ended December 31, 2024, the Company performed and quantitative goodwill impairment

analysis and it was determined no impairment was needed during the year.

During the year ended December 31, 2023 the Company

experienced significant decline in our stock price and sustained losses from operations.

Therefore, we completed a quantitative

goodwill impairment analysis as of December 31, 2023.

The results of the analysis indicated an impairment loss for goodwill related

to acquisitions prior to 2021, and we recorded a non-cash impairment of $14.7 million.

Income and Expenses

Company incurred $3.3 million in interest expense for the year ended December 31, 2023, compared to $3.5 million for the year ended December

The interest expense is comprised of interest incurred on promissory notes payable, the company’s line of credit, and

vendor payables.

Company incurred $3.5 million in interest expense for the year ended December 31, 2024,

compared to $3.3 million for the year ended December 31, 2023.

The interest expense is comprised of interest incurred on promissory notes

payable, the company’s line of credit, and vendor payables.

Currency Transactions

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for Income Taxes

the year ended December 31, 2023, the Company has $741 thousand of current income tax provision (US State & Local and Foreign) and

$221 thousand deferred income tax expense.

For the year ended December 31, 2024, the Company has $12 thousand of current

income tax expense (US State & Local and Foreign) and $882 thousand deferred income tax benefit.

the year ended December 31, 2023, the Company has $741 thousand of current income tax provision (US State & Local and Foreign) and

$221 thousand deferred income tax expense.

Company realized a net loss of $29.4 million for the year ended December 31, 2023, compared to a net loss of $13.6 million for the year

ended December 31, 2022.

The increased loss in 2023 is due primarily to impairment of goodwill and the decrease in revenue.

Company realized a net loss of $10 million for the year ended December

31, 2024, compared to a net loss of $29.4 million for the year ended December 31, 2023.

The decreased loss in 2024 is due primarily to

impairment of goodwill from prior year not in 2024 and the decrease in revenue.

and Capital Resources

of December 31, 2023, the Company had cash in the amount of $1.7 million and a working capital deficit of $45 million, compared to cash

in the amount of $1.3 million, and a working capital deficit of $38 million as of December 31, 2022.

The Company had stockholders’

deficit attributable to OmniQ stockholders of $35 million and $10.5 million as of December 31, 2023 and 2022, respectively.

This increase

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

Company’s accumulated deficit was $113.9 million and $84.4 million as of December 31, 2023 and 2022, respectively.

Company’s operations provided net cash of $170 thousand and $1.2 million for the years ended December 31, 2023 and 2022, respectively.

The decrease of cash from operations of $1 million is primarily a result of reduction in sales.

Company’s cash used in investing activities was $331 thousand for the year ended December 31, 2023 compared to cash used by investing

activities of $4.2 million for the year ended December 31, 2022.

Company’s financing activities used $50 thousand of cash during the year ended December 31, 2023, and used $3 million during the

year ended December 31, 2022.

During the year ended December 31, 2023, the Company made payments of $1.4 million on its notes payable,

compared to the year ended December 31, 2022, when the Company made payments of $2.5 million on its notes payable, including its Supplier

Secured Promissory note and related party notes payable.

Additionally, the Company paid $1.6 million on the Company’s line of credit

during the year ended December 31, 2023, compared to the year ended December 31, 2022, when the Company paid $4 million on the line of

The Company raised net proceeds of $2.4 million for the year ended December 31, 2023 and no funds were raised for the year ended

December 31, 2022.

of December 31, 2024, the Company had cash in the amount of $2.3 million

and a working capital deficit of $54 million, compared to cash in the amount of $1.7 million, and a working capital deficit of $45 million

as of December 31, 2023.

The Company had stockholders’ deficit attributable to OmniQ stockholders of $43.9 million and $35 million

as of December 31, 2024 and 2023, respectively.

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

Company’s accumulated deficit was $123.9 million and $113.9 million

as of December 31, 2024 and 2023, respectively.

Company’s operations provided net cash of $2.4 million and $170 thousand for the years ended December 31, 2024 and 2023, respectively.

The increase of cash from operations of $2.2 million is primarily a result of increase in payables and other liabilities.

Company’s cash used in investing activities was $32 thousand for

the year ended December 31, 2024 compared to cash used by investing activities of $331thousand for the year ended December 31, 2023.

Company’s financing activities used $2.87 million of cash during

the year ended December 31, 2024, and used $50 thousand during the year ended December 31, 2023.

During the year ended December 31, 20243,

the Company made payments of $3.2 million on its notes payable, compared to the year ended December 31, 2023, when the Company made payments

of $1.4 million on its notes payable, including its Supplier Secured Promissory note and related party notes payable.

Additionally, the

Company received $292 thousand in the year ended December 31, 2024 on its line of credit and had paid $1.6 million on the Company’s

line of credit during the year ended December 31, 2023.

The Company raised no funds in the year ended December 31, 2024 and raised net

proceeds of $2.4 million for the year ended December 31, 2024.

Sheet Arrangements

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of our significant accounting policies.

Recognition .

determine revenue recognition through the following steps:

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accounting policies can be found in Note 16 to our Audited Consolidated Financial Statements.

adopted accounting pronouncements

June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2016-13,

Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which changes how entities will

measure credit losses for financial assets and certain other instruments that are not measured at fair value through net income.

new expected credit loss impairment model requires immediate recognition of estimated credit losses expected to occur.

Additional disclosures

are required regarding assumptions, models, and methods for estimating the credit losses.

ASU 2019-10, Financial Instruments-Credit Losses

(Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates, deferred the effective date for non-public

The standard is effective for non-public companies for fiscal years beginning after December 15, 2022.

We adopted these requirements

as of January 1, 2023 with no material impact on our consolidated financial statements.

August 2020, the Financial Statement Accounting Board (the “FASB”) issued ASU 2020-06 which simplifies the accounting for

convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity.

For contracts

in an entity’s own equity, the new guidance eliminates some of the current requirements for equity classification such as the requirement

that settlement in unregistered shares is permitted.

In addition, the new guidance reduces the number of accounting models that require

separating embedded conversion features from convertible instruments, including eliminating the requirement to recognize a beneficial

conversion feature if the conversion feature is in the money and does not require bifurcation as a derivative liability.

only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately.

The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires

enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity.

The Company adopted the

new standards January 1, 2023.

The adoption of this standard may allow the Company, in the future and in certain circumstances, to avoid

derivative treatment of warrants and avoid beneficial conversion treatment of certain convertible preferred shares.

Adoption of this

standard had no effect on the Company’s financial statements.

Accounting Pronouncements not yet adopted

November 2023, the FASB issued ASU No.

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which

requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis.

Additionally,

it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”).

This ASU will be effective

for the Company’s fiscal December 31, 2024 year-end and interim periods beginning in fiscal 2025, with early adoption permitted.

We are assessing the impact of this guidance on our disclosures;

it will not have an impact on our results of operations, cash flows,

or financial condition.

December 2023, the FASB issued ASU No.

to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on

an annual and interim basis.

Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”).

This ASU will be effective for the Company’s fiscal December 31, 2024 year-end and interim periods beginning in fiscal 2025, with

early adoption permitted.

Our CODM is Shai Lustgarten, our CEO.

See Note 18 – Operating Segments for required disclosures.

Recent Accounting Pronouncements not yet adopted

In December 2023, the FASB issued ASU No.

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires an annual

tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well

as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction.

This ASU will be effective for the Company’s fiscal December 31, 2025 year-end, with early adoption permitted.

We are assessing

the impact of this guidance on our disclosures;

it will not have an impact on our results of operations, cash flows, or financial condition.

Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure

including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received,

disaggregated by federal, state/local, and significant foreign jurisdiction.

This ASU will be effective for the Company’s fiscal

December 31, 2025 year-end, with early adoption permitted.

We are assessing the impact of this guidance on our disclosures;

have an impact on our results of operations, cash flows, or financial condition.

In November 2024, the FASB issued ASU 2024-03 “Income

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-K

Item 7. Management’s Discussion and Analysis