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Item 1. Financial Statements

2025-08-19 compared with 2025-05-15 · 460 added, 357 removed, 60 unchanged (93% of the section changed)

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2025

December 31, 2024

(In thousands, except share and per share data)

March 31, 2025

December 31, 2024

CONSOLIDATED BALANCE SHEETS

thousands, except share and per share data)

( UNAUDITED )

Current assets

Cash and cash equivalents

Accounts receivable, net

and cash equivalents

receivable, net

Inventory, net

Prepaid expenses, related party

Prepaid expenses

Other current assets

Total current assets

Property and equipment, net of accumulated depreciation

Trade name, net of accumulated amortization

Customer relationships, net of accumulated amortization

Other intangibles, net of accumulated amortization

Right of use lease asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

current assets

and equipment, net of accumulated depreciation

name, net of accumulated amortization

relationships, net of accumulated amortization

intangibles, net of accumulated amortization

of use lease asset

AND STOCKHOLDERS’ EQUITY (DEFICIT)

payable and accrued liabilities

payroll and sales tax

payable – current portion

liability – current portion

current liabilities

Accounts payable and accrued liabilities

Line of credit

Accrued payroll and sales tax

Notes payable – current portion

Lease liability – current portion

Other current liabilities

Total current liabilities

current liabilities

interest and accrued liabilities, related party

payable, less current portion

party notes payable

Notes payable

long term liabilities

Accrued interest and accrued liabilities, related party

Notes payable, less current portion

Lease liability

Other long term liabilities

Total liabilities

Commitments and Contingencies

Stockholders’ equity (deficit)

Series A Preferred stock;

Stockholders’

equity (deficit)

A Preferred stock;

$ 0.001 par value;

2,000,000 shares designated, 0 shares issued and outstanding

Series B Preferred stock;

B Preferred stock;

$ 0.001 par value;

1 share designated, 0 shares issued and outstanding

Series C Preferred stock;

C Preferred stock;

$ 0.001 par value;

1 unchanged sentence

Preferred stock value

Common stock;

$ 0.001 par value;

1 unchanged sentence

10,712,930 and 10,712,930 shares issued and outstanding, respectively.

Additional paid-in capital

Accumulated (deficit)

Accumulated other comprehensive income

Total OmniQ stockholders’ equity (deficit)

Total liabilities and stockholders’ equity

The accompanying unaudited notes should be read in

conjunction with these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

For the Three months ended

(In thousands, except share and per share data)

Cost of goods sold

paid-in capital

other comprehensive income (loss)

OmniQ stockholders’ equity (deficit)

liabilities and equity (deficit)

accompanying unaudited notes should be read in conjunction with these unaudited condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

the three months ending

the six months ended

thousands, except share and per share data)

of goods sold

& Development

general and administrative

operating expenses

Research & Development

Selling, general and administrative

Total operating expenses

Loss from operations

from operations

income (expenses):

(expenses) income

on debt settlement

other income (expenses )

Interest expense

Other (expenses) income

Total other expenses

Net Loss Before Income Taxes

Current Provision for Income Taxes

Total Provision for Income Taxes

Foreign currency translation adjustment

Comprehensive loss

Reconciliation of net loss to net loss attributable to common shareholders

Dividends attributable to non-common stockholders’ of OmniQ Corp

Net loss attributable to common stockholders’ of OmniQ Corp

Net (loss) per share - basic attributable to common stockholders’ of OmniQ Corp

Weighted average number of common shares outstanding - basic

The accompanying unaudited notes should be read in

conjunction with these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

For the Three Months ended

March 31, 2024 and 2025

(In thousands)

Income (Loss) Before Income Taxes

for Income Taxes

Provision for Income Taxes

(loss) from continuing operations

from discontinued operations (net of tax)

Income (Loss)

Accumulated Other

Total Stockholders’

Preferred Stock

Income (Loss)

currency translation adjustment

Comprehensive

(In thousands)

income (loss)

Balance, December 31, 2023

Reconciliation

of net loss to net loss attributable to common shareholders

Income (Loss)

Dividends attributable to non-common stockholders’ of OmniQ Corp

income (loss) attributable to common stockholders’ of OmniQ Corp

income (loss) per share - basic attributable to common stockholders’ of OmniQ Corp

Net income (loss) per share – diluted

from discontinued operations (net of tax)

loss per share from discontinued operations

Weighted average

number of common shares outstanding - basic

Weighted average number of common shares outstanding – diluted

accompanying unaudited notes should be read in conjunction with these unaudited condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

the three and six months ended June 30, 2024 and 2025

Stockholders’

Comprehensive

December 31, 2023

$ ( 113,923 )

Dividend on Class C Shares

CodeBlocks Acquisition

on Class C Shares

ESPP Stock Issuance

Stock-based compensation – options, warrants, issuances

Acquisition of Codeblocks

Cumulative Translation Adjustment

2 unchanged sentences

$ ( 115,972 )

Balance, December 31, 2024

Dividend on Class C Shares

Stock Issuance

compensation – options, warrants, issuances

Translation Adjustment

(loss) income

June 30, 2024

December 31, 2024

$ ( 123,899 )

on Class C Shares

compensation – options, warrants, issuances

Translation Adjustment

(loss) income

March 31, 2025

$ ( 125,995 )

Dividend on Class C Shares

Stock-based compensation – options, warrants, issuances

Cumulative Translation Adjustment

Net (loss) income

Balance, March 31, 2025

$ ( 125,995 )

on Class C Shares

of assets from division

compensation – options, warrants, issuances

Translation Adjustment

(loss) income

June 30, 2025

$ ( 123,947 )

The accompanying unaudited notes

should be read in conjunction with these condensed unaudited consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS (UNAUDITED)

For the Three Months Ended

(In thousands)

Cash flows from operations

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation

Depreciation and amortization

Amortization of ROU asset

Loss from sale of other assets

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses

Accounts payable and accrued liabilities

Accrued payroll and sales taxes payable

Lease liability

Deferred tax assets, net

Other liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Purchase of property and equipment

Net cash (used in) investing activities

Cash flows from financing activities

Proceeds from ESPP stock issuance

Payments on notes/loans payable

Proceeds from draw on line of credit

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

Effect of foreign exchange rates on cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Non-cash activities:

Declared dividends payable

Right of use asset acquired in exchange for lease liability

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes

The accompanying unaudited notes

are an integral part of these unaudited condensed consolidated financial statements.

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

generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported.

$ ( 123,947 )

accompanying unaudited notes should be read in conjunction with these condensed unaudited consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

the six months ended June 30,

flows from operations

to reconcile net loss to net cash provided by operating activities:

and amortization

in operating assets and liabilities:

payable and accrued liabilities

interest and accrued liabilities, related party

payroll and sales taxes payable

tax assets, net

cash provided by (used in) operating activities

flows from investing activities

of property and equipment

paid for divestiture

from sale of property and equipment

cash provided by (used in) investing activities

flows from financing activities

from ESPP stock issuance

on notes/loans payable

from draw on line of credit

cash (used in) provided by financing activities

change in cash and cash equivalents

of foreign exchange rates on cash and cash equivalents

and cash equivalents at beginning of period

and cash equivalents at end of period

dividends payable

assets acquired in business combination

of use asset acquired in exchange for lease liability

disclosure of cash flow information:

paid for interest

paid for income taxes

accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2024 (the “2024 Form 10-K”).

We describe our significant accounting policies in

Note 2 of the notes to consolidated financial statements in the 2024 Form 10-K.

During the three-month period ended March 31, 2025, there

were no significant changes to those accounting policies other than below.

Accounting Standards Updates

ASU 2023-09, “Income Taxes (Topic 740), Improvement

to Income Tax Disclosures.” The amendments in ASU 2023-09 require an entity to disclose specific categories in the rate reconciliation

and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the

amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis.

Additionally, the amendments

in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and

foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to

or greater than five percent of total income taxes paid (net of refunds received).

Lastly, the amendments in this ASU require an entity

to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign

and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign.

This ASU is effective for

annual periods beginning after December 15, 2024.

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, 2024 (the “2024 Form

describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in the 2024 Form 10-K.

the six-month period ended June 30, 2025, there were no significant changes to those accounting policies other than below.

Standards Updates

2023-09, “Income Taxes (Topic 740), Improvement to Income Tax Disclosures.” The amendments in ASU 2023-09 require an entity

to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative

threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory

rate, on an annual basis.

Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net

of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received)

disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received).

Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense

(or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated

by federal, state, and foreign.

This ASU is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

1 unchanged sentence

however, retrospective application is permitted.

The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s

financial statements.

Net Loss Per Common Share

Net 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 three-months

ended March 31, 2025, and 2024 were 10,712,930 and 10,688,340 , respectively.

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:

The adoption of ASU 2023-09

is not expected to have a material impact on the Company’s financial statements.

Loss Per Common Share

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 three-months ended June 30, 2025, and 2024 were 10,712,930 and 10,688,340 , respectively.

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.

following table sets forth the potentially dilutive securities excluded from the computation of diluted net income or loss per share because such

securities have an anti-dilutive impact and are out of the money:

SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNING PER SHARE

March 31, 2025

March 31, 2024

Options to purchase common stock

Warrants to purchase common stock

Potential shares excluded from diluted net loss per share

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 $ 55.1 million as of March 31, 2025

Accumulated deficit of $ 126 million as of March 31, 2025

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.

Blue Star - The Company’s total accounts payable due to Blue Star as of March 31, 2025, was approximately $ 56.6 million.

Blue 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 six years.

NOTE 3 – CONCENTRATIONS

For the three-months ended March 31, 2025, and the

year ended December 31, 2024, no customer accounted for more than 10 % and one customer accounted for 23.7 %, respectively, of the Company’s

June 30, 2025

June 30, 2024

to purchase common stock

shares excluded from diluted net loss per share

2 – GOING CONCERN

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

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

and cost-effective development of products

capital deficit of $ 10.9 million as of June 30, 2025

deficit of $ 124 million as of June 30, 2025

years of losses from operations

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.

Plans to Mitigate and Alleviate Conditions or Events

is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations.

has placed a strategic focus on increasing sales with prime customers.

efforts are focused on the most profitable product lines.

Company completed the sale of one of it’s divisions as of June 30, 2025, which included the removal of a net $ 45 million worth

of debt on the Company’s books..

3 – CONCENTRATIONS

the six-months ended June 30, 2025, and the year ended December 31, 2024, no customer accounted for more than 3 % for the six months ended June 30, 2025 and one customer made up 23.7 % for December 31, 2024, of the Company’s

consolidated revenues.

Accounts receivable at March

31, 2025 and December 31, 2024 are made up of trade receivables due from customers in the ordinary course of business.

accounted for 11.2 % of the outstanding receivables as of March 31, 2025, and 26 % as of December 31, 2024.

For the three months ended March 31, 2025, and the

year ended December 31, 2024 one vendor made up 45 % and 47 %, respectively, of our purchases.

NOTE 4 – BUSINESS COMBINATIONS

CodeBlocks LTD

receivable at June 30, 2025 and December 31, 2024 are made up of trade receivables due from customers in the ordinary course of business.

One customer accounted for 6 % of the outstanding receivables as of June 30, 2025, and 26 % as of December 31, 2024.

the six months ended June 30, 2025, and the year ended December 31, 2024 no vendor made up more than 3 % as of June 30, 2025 and 47 % as of December 31, 2024 of our trade payables.

4 – BUSINESS COMBINATIONS

On January 30, 2024, OMNIQ’s wholly owned subsidiary, Dangot Computers Ltd.

9 unchanged sentences

The purchase Agreement closed on February 1, 2024.

As of March 31, 2025, the total amount outstanding

is NIS 4.4 million, approximately $ 1 million USD, and is presented on the balance sheet in short- and long-term notes payable.

NOTE 5 – INVENTORY

Inventory consisted of the following as of:

March 31, 2025

December 31, 2024

Raw materials

Inventory in transit

Finished goods (less allowance)

Less allowance for obsolescence

Total inventories

NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT

We maintain operating lines of credit, factoring and

revolving credit facilities with banks and finance companies to provide us with working capital.

On January 18, 2024, the Company’s wholly owned

subsidiary, Quest Marketing, Inc.

(“Quest”) entered into a Purchase and Sale Agreement with Prestige Capital Finance, LLC

(“Prestige”), in which Quest has sold, transferred and assigned all of its rights, title, and interest to specific accounts

receivable owed to Quest.

The maximum outstanding balance of Quest to Prestige shall be $ 7.5 million.

The discount fee starts at 1.5 %

and increases based on the age of the outstanding receivables.

The balance as of March 31, 2025, was $ 0 .

NOTE 7 – RELATED PARTY NOTES PAYABLE

Note Payable – Marin

In December 2017, we entered

into a $ 660 thousand note payable at 1.89 % annual interest rate (the “Marin Note”) with two individuals from whom

we previously acquired their company (in 2014).

The Marin Note was payable in 60 monthly principal payments of

$ 20 thousand beginning in October 2018.

Accrued interest payable as of March 31, 2025 and December 31, 2024, was

$ 73 thousand and $ 73 , respectively.

As of June 30, 2025, this entity was sold as

part of the sale discussed in Note 11.

5 – INVENTORY

consisted of the following as of:

goods (less allowance)

allowance for obsolescence

inventories (continuing operations)

relate to discontinued operations

6 – CREDIT FACILITIES AND LINE OF CREDIT

maintain operating lines of credit, factoring and revolving credit facilities with banks and finance companies to provide us with working

January 18, 2024, the Company’s wholly owned subsidiary, Quest Marketing, Inc.

(“Quest”) entered into a Purchase and

Sale Agreement with Prestige Capital Finance, LLC (“Prestige”), in which Quest has sold, transferred and assigned all of

its rights, title, and interest to specific accounts receivable owed to Quest.

The maximum outstanding balance of Quest to Prestige shall

be $ 7.5 million.

The discount fee starts at 1.5 % and increases based on the age of the outstanding receivables.

The balance as of June

30, 2025, was $ 0 and this credit facility was terminated concurrent with the sale of the assets from Quest Marketing, Inc.

7 – RELATED PARTY NOTES PAYABLE

Payable – Marin

December 2017, we entered into a $ 660 thousand note payable at 1.89 % annual interest rate (the “Marin Note”) with two individuals

from whom we previously acquired their company (in 2014).

The Marin Note was payable in 60 monthly principal payments of $ 20 thousand

beginning in October 2018.

Accrued interest payable as of March 31, 2025 and December 31, 2024, was $ 73 thousand and $ 73 , respectively.

Accrued interest was payable at maturity.

This accrued interest was outstanding as of March

NOTE 8 – OTHER NOTES PAYABLE

This accrued interest balance was $ 0 as of June 30, 2025.

Payable – Summit

June 30, 2025, concurrent with the sale of the business unit, the Company entered into a promissory note for $ 10

million at 5 %

annual interest rate (the “Summit Note”), the note is amortized over 10

years , but a balloon payment in 3

years for the then balance.

The Company is required to make 13

payments every year , with annual payments totaling $ 1,378,852 .

Accrued interest as of June 30, 2025 was $ 0

and the balance as of June 30, 2025 was $ 10,000,000 .

At June 30, 2025, the company had put up a $ 200,000 prepaid expense towards transaction costs with Summit Junction

and this amount appears on the Balance Sheet as a prepaid expenses, related party.

8 – OTHER NOTES PAYABLE

SCHEDULE OF OTHER NOTES PAYABLE

(In thousands)

March 31, 2025

December 31, 2024

Note payable other

Less current portion

Long-term notes payable

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, 2024, the balance owed is

$ 1,815,840 and at March 31, 2025, the balance owed is $ 1,886,466 NIS (approx.

June 30, 2025

payable other

current portion

notes payable

Payable Other

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, 2024, the

balance owed is $ 1,815,840 and at June 30, 2025, the balance owed is $ 1,886,466 NIS (approx.

$ 528,211 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.

On September 13, 2022, the Company entered into a

long-term loan from Hapoalim Bank totaling NIS 3 million, approximately US $ 0.9 million.

The note accrues interest at 7.28 %

per annum (Israeli Prime Rate plus 1.28 %) and is payable in 36 installments of principal and interest over 3 years.

The balance at March 31, 2025 was approximately $ 0.14 million.

During the year ended December 31, 2023, the Company

entered into a short-term loan Hapoalim Bank totaling NIS 2.5 million, approximately US $ 0.67 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 December 31, 2024 was 7.3 %.

In February 2024, NIS 1.5 million of the loan was converted into a short-term loan to be repaid in 12 installments,

bearing interest at Prime + 1.5 %.

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

The loan accrues interest at 7.5 %

per annum and is secured by the vehicles.

This was completed in January 2025.

September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totaling NIS 3 million, approximately US $ 0.9 million.

The note accrues interest at 7.28 % per annum (Israeli Prime Rate plus 1.28 %) and is payable in 36 installments of principal and interest

over 3 years.

The balance at June 30, 2025 was approximately $ 0.14 million.

the year ended December 31, 2023, the Company entered into a short-term loan Hapoalim Bank totaling NIS 2.5 million, approximately US

$ 0.67 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 December 31, 2024 was 7.3 %.

In February 2024, NIS 1.5 million of the loan was converted into a short-term loan to be repaid in 12

installments, 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 installments, bearing interest at a rate of Prime + 1.5 %.

At December 31, 2024, the Company owed Hapoalim Bank USD

$ 1.39 million.

At March 31, 2025, the balance was approximately $ 1.5 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, 2024 was 7.89 %.

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, 2024 was 9.25 %.

At December 31, 2024, the Company owed Hapoalim Bank USD $ 1.39 million.

At June 30, 2025, the balance was approximately $ 1.5 million.

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, 2024 was 7.89 %.

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, 2024 was 9.25 %.

At December 31, 2024, the Company owed Bank Leumi

USD $ 5.4 million.

At March 31, 2025, the Company owed Bank Leumi approximately USD $ 5.4 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 9.5 % per annum and is payable in 36 monthly installments.

at December 31, 2024 is $ 251 thousand and at March 31, 2025 was $ 212 thousand.

As of March 31, 2025, 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.

At June 30, 2025, the Company owed Bank Leumi approximately USD $ 5.4 million.

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 9.5 % per annum and is payable in 36 monthly installments.

The balance at December 31, 2024 is $ 251 thousand and at June 30, 2025 was $ 212 thousand.

of June 30, 2025, 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.

we reclassified the total balance as current debt on the balance sheet.

The Company is actively pursuing options to address its noncompliance.

The lenders have not requested early repayment

of the loan as of the date when these financial statements were available to be issued.

NOTE 9 – OTHER INCOME

For the three months ended March 31, 2025, the Company

received government relief funds in the amount of approximately NIS 1.7 million or US $ 609 thousand.

NOTE 10 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

As of March 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 .

As of March 31, 2025, there was 1 preferred share

designated and no preferred shares outstanding.

As of March 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 March 31, 2025, the accrued dividends on the Series C Preferred Stock was $ 219

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 .

EQUITY INCENTIVE PLAN

In October 2021, OMNIQ’ Board of Directors adopted

an Equity Incentive Plan (the “Plan”), as an incentive to retain in the employ of and attract new employees, directors, officers, advisors, and employees to the Company.

Pursuant to the Plan, 1,118,856 shares of the Company’s common stock, par value

$ 0.001 (the “Shares”), were set aside and reserved for issuance.

The Plan was approved by our stockholders at the December

2021, shareholders’ meeting.

No shares were issued in the three months ended March 31, 2025 and 14,409 shares were issued during the three months ended March 31, 2024.

NOTE 11 – LITIGATION

The Company was named a

defendant in a case involving a former employee who claims he is owed approximately $ 60 thousand in unpaid commissions.

was settled in February 2024.

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 lenders have not requested early repayment of the loan as of the date when these financial statements were available to be issued.

9 – OTHER INCOME

the six months ended June 30, 2025, the Company received government relief funds in the amount of approximately NIS 1.7 million or US

$ 609 thousand.

the six months ended June 30, 2025, the Company received Employee Retention Credit refunds in the amount of approximately $ 1.05 million

for returns filed for prior years.

10 – STOCKHOLDERS’ EQUITY

of June 30, 2025, there were 2,000,000 Series A preferred shares designated and no Series A preferred shares outstanding.

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.

of June 30, 2025, there was 1 preferred share designated and no preferred shares outstanding.

of June 30, 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, 2025, the accrued dividends on the

Series C Preferred Stock was $ 226 thousand.

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.

INCENTIVE PLAN

October 2021, OMNIQ’ Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in

the employ of and attract new employees, directors, officers, advisors, and employees to the Company.

Pursuant to the Plan, 1,118,856

shares of the Company’s common stock, par value $ 0.001 (the “Shares”), were set aside and reserved for issuance.

Plan was approved by our stockholders at the December 2021, shareholders’ meeting.

shares were issued in the six months ended June 30, 2025 and 17,089 shares were issued during the six months ended June 30, 2024.

the quarter, the Company issued stock options or warrants to 47 employees and consultants for the purchase of an aggregate 1,035,000

shares of stock at between $ 0.06

The Company’s CEO was issued options for 50,000

shares at $ 0.07

and warrants were issued to a company he is affiliated with

shares at exercise price of $ 0.07

per share, which was above the market price at the time of

The options have a 5

year expiration period and vested immediately.

Approximately $ 63,000

was booked as a compensation expense related to these options

and warrants.

11 – LITIGATION

Company was named a defendant in a case involving a former employee who claims he is owed approximately $ 60 thousand in unpaid commissions.

This case was settled in February 2024.

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.

The Company believes that it has meritorious defenses to such action and intends to vigorously defend

The initial claim

against Dangot Computers is NIS 21 million approximately US $ 5.6 million.

The Company believes that it has meritorious defenses to such

action and intends to vigorously defend itself;

however, at this stage it is too early to assess the chances of the lawsuit with certainty.

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 thousand 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.

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 thousand 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.

12 – BUSINESS SEGMENT

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.

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 13 – SUBSEQUENT EVENTS

Company operates in a single reportable segment, referred to as providing solutions including software, communications, and automated

management service.

The business is managed by the chief executive officer who is the Chief Operating Decision Maker (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.

13 – DISCONTINUED OPERATIONS

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

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.

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 sale resulted in a net gain on disposal of

approximately $ 34.7 m, 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

it would be more conservative to record the gain to Additional Paid-in Capital instead of in Other Income.

The net gain (APIC) was calculated as follows (in thousands):

SCHEDULE OF NET GAIN ON ADDITIONAL PAID IN CAPITAL

Change in Value

Cash and cash equivalents

Accounts receivable, net

Inventory, net

Other current assets

Property and equipment, net of accumulated depreciation

Accounts payable and accrued liabilities

Other current liabilities

Related party notes payable

Additional paid-in capital

Details of net loss from discontinued operations , net of taxes,

are as follows (in thousands):

SCHEDULE OF DISCONTINUED OPERATIONS

Six months ended

June 30, 2025

June 30, 2024

Cost of goods sold

Selling, general and administrative

Research & Development

Interest expense

Other (expenses) income

Net Loss from Discontinued Ops (Net of Tax)

Three months ended

June 30, 2025

June 30, 2024

Cost of goods sold

Selling, general and administrative

Research & Development

Interest expense

Other (expenses) income

Net Loss from Discontinued Ops (Net of Tax)

Because the transaction was effective June 30,2025, no assets or liabilities

disposed in the sale were included on the balance sheet as of June 30, 2025.

The balances of the disposed assets and liabilities as of

December 31, 2024 were as follows:

Current Assets

Accounts receivable, net

Inventory, net

Prepaid expenses

Other current assets

Total current assets

Property and equipment, net of accumulated depreciation

Right of use lease asset

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued liabilities

Accrued payroll and sales tax

Lease liability – current portion

Other current liabilities

Lease liability

Total liabilities

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, 2025

Six months ended June 30, 2024

Depreciation and amortization

Capital expenditures

Other significant non-cash items

Cancelation of lease

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

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

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.

The bonus has been accrued but as of this filing nothing has been paid on the bonus.

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.

a fairness opinion was obtained, it does not fully satisfy ASC 820 fair value measurement requirements for full recognition.

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.

14 – SUBSEQUENT EVENTS

July 2025, the Company settled approximately $ 62,500 of debt owed on the books for 900,000 shares.

As noted in the Company’s 8-K

filing, 450,000 of those shares were issued to the Company CEO, Shai Lustgarten to settled $ 31,500 owed to him.

July 2025, the Company relocated its corporate headquarters to a new address.

The new office / warehouse lease is at $ 15,000 per month

in rent for 7 years .

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 1. Financial Statements