What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-19 compared with 2025-05-15 · 137 added, 134 removed, 9 unchanged (97% of the section changed)

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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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;

For a more detailed discussion of some of the foregoing

risks and uncertainties, see Item 1A — “Risk Factors” in our 2024 Form 10-K and Item 1A — “Risk Factors”

in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, 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.

We use patented and proprietary artificial intelligence

(AI) technology to deliver data collection, real-time surveillance and monitoring for supply chain management, homeland security, public

safety, traffic & parking management, and access control applications.

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.

We are an established distributor of barcode labels, tags, and ribbons, as well as

RFID labels and tags.

We provide printing solutions, credit card terminals, automatic kiosks and point-of-care units.

We also offer technical

service and support.

Our highly tenured team of professionals has the knowledge and expertise to simplify the integration process for

our customers, and our team delivers proven problem-solving solutions backed by numerous customer references.

We offer comprehensive packaged

and configurable software, and we are a leading provider of best-in-class mobile and wireless equipment.

Our customers include government agencies and leading

Fortune 500 companies from diverse sectors, including healthcare, food and beverage, manufacturing, retail, distribution, and transportation

and logistics.

Since 2014, our annual consolidated revenues have grown to more than $80 million with clients in more than 40 countries.

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.

The Company’s sales from operations for the

three months ended March 31, 2025, were $19.9 million, an increase of approximately $1.6 million or 8.7%, over the three months ended March

The loss from operations for

the three months ended March 31, 2025, was $690 thousand, a decrease of $569 thousand compared with the loss in the three months ended

March 31, 2024, of $1.3 million.

Basic loss per share from continuing operations for the three months ended March 31, 2025, was ($0.20)

versus ($0.20) per share for the same period in 2024.

Comprehensive loss for the three months ended March 31, 2025 and 2024 was $1.6

million and $1.9 million respectively, the only component to comprehensive loss besides net loss is foreign currency translation.

LIQUIDITY AND CAPITAL RESOURCES

of March 31, 2025, the Company had cash in the amount of $2.7 million and a working capital deficit of $55 million, compared to cash

Such factors include,

but are not limited to, the following:

ability to raise capital when needed and on acceptable terms and conditions;

ability to manage credit and debt structures from vendors, debt holders, and secured lenders.

ability to manage the growth of our business through internal growth and acquisitions;

ability to attract and retain management, and to integrate and maintain technical information and management information systems.

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;

a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our 2024

Form 10-K and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended June 30,

2025, 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.

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.

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.

principal solutions include hardware, software, communications, and automated management services, technical service and support.

highly tenured team of professionals has the knowledge and expertise to simplify the integration process for our customers.

practical problem-solving solutions backed by numerous customer references.

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.

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.

Pursuant to the asset sale described in the Notes

to the Financial Statements, the assets of one division were sold during the second quarter of 2025.

Accordingly, the financial statements

have reclassified the related revenues and expenses from both prior periods and the current period into a single line item for “Discontinued

Operations” on the face of the financial statements, with further detail provided in the accompanying Notes.

Company’s sales for the six months ended June 30, 2025, and 2024, were $15.8 million and $17.6 million, respectively.

between the six-month periods was attributable to deceleration of projects by customers.

loss from operations for the six months ended June 30, 2025, was $678 thousand, a decrease of $569 thousand compared with the loss in

the six months ended June 30, 2024, of $2.27 million.

Basic loss per share from continuing operations for the six months ended June 30,

2025, was ($0.00) versus ($0.48) per share for the same period in 2024.

Comprehensive loss for the six months ended June 30, 2025 and

2024 was $1.87 million and $3.7 million respectively, the only component to comprehensive loss besides net loss is foreign currency translation.

AND CAPITAL RESOURCES

of June 30, 2025, the Company had cash in the amount of $2.2 million and a working capital deficit of $10.9 million, compared to cash

in the amount of $2.3 million, and a working capital deficit of $54.4 million as of December 31, 2024.

The Company had stockholders’

deficit attributable to OmniQ stockholders of $45.5 million and $43.8 million as of March 31, 2025, and December 31, 2024, respectively.

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

Company’s accumulated deficit was $126 million and $124 million as of March 31, 2025, and December 31, 2024.

Company’s operations provided net cash of $1 million and used $623 thousand in the three months ended March 31, 2025, and 2024,

deficit attributable to OmniQ stockholders of $11 million and $43.8 million as of June 30, 2025, and December 31, 2024, respectively.

This decrease in our stockholders’ deficit was primarily attributable to sale of assets.

Company’s accumulated deficit was $124 million and $124 million as of June 30, 2025, and December 31, 2024.

Company’s operations provided net cash of $6.08 million and used $3.6 million in the six months ended June 30, 2025, and 2024,

respectively.

The increase in cash provided in operations of $1.6 million is due to the increase in revenue.

Company’s cash used in investing activities was $31 thousand for the three months ended March 31, 2025, compared to cash used in

investing activities of $48 thousand for the three months ended March 31, 2024.

Company’s financing activities used $1.2 million of cash during the three months ended March 31, 2025, and used $971 thousand during

the three months ended March 31, 2024.

Results of Operations

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.

The increase in cash provided in operations of approximately $10 million is due to the increase in revenue and decrease

Company’s cash used in investing activities was $2.5 million for the six months ended June 30, 2025, compared to cash used in investing

activities of $103 thousand for the six months ended June 30, 2024.

Company’s financing activities used $1.7 million of cash during the six months ended June 30, 2025, and used $1.34 million

during the six months ended June 30, 2024.

of Operations

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

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

Amounts are presented

in thousands.

For the 6 months ended

1 unchanged sentence

Operating Expenses

Loss from operations

Income (Loss) from operations

Net income (loss) from continuing operations

Loss from discontinued operations (net of tax)

Net income (loss)

Net Loss per common Share from continuing operations

For the three months ended March 31, 2025, and 2024,

the Company generated net revenues in the amount of $19.9 million and $18.3 million, respectively.

The increase between the three-month

periods was attributable to acceleration of projects by customers.

Cost of Goods Sold

For the three months ended March 31, 2025, and 2024,

the Company recognized a total of $14.8 million and $13.3 million, respectively, of cost of goods sold.

For the three months ended March

31, 2025, and 2024, cost of goods sold were 74% and 72% of net revenues, respectively.

Operating expenses

Total operating expenses for the three months ended

March 31, 2025, and 2024 recognized was $5.8 million and $6.3 million, respectively, representing a 7.7% decrease.

The decrease in operating

expenses was due primarily to management’s cost savings plan.

Research and Development – Research

and development expenses for the three months ended March 31, 2025, and 2024 totaled $507 thousand and $405 thousand, respectively.

Selling, general and Administrative

– Selling, general and administrative expenses for the three months ended March 31, 2025, and 2024 totaled $5.1 million and $5.6

million, respectively, representing a 9% decrease.

The decrease was due primarily to management’s cost savings plan.

Depreciation – Depreciation expenses

for the three months ended March 31, 2025, and 2024 totaled $28 thousand and $116 thousand, respectively, representing a 76% decrease.

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

Intangible amortization – Intangible

amortization expenses for the three months ended March 31, 2025, and 2024 totaled $232 thousand and $231 thousand, respectively.

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 March 31, 2025, totaled $462 thousand, as compared to $917 thousand for the three months ended March 31, 2024.

The decrease is primarily attributable to the reduced line of credit.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not Applicable

the six months ended June 30, 2025, and 2024, the Company generated net revenues in the amount of $15.8 million and $17.6 million, respectively.

The decrease between the six-month periods was attributable to deceleration of projects by customers.

of Goods Sold

the six months ended June 30, 2025, and 2024, the Company recognized a total of $11.6 million and $13.5 million, respectively, of cost

of goods sold.

For the six months ended June 30, 2025, and 2024, cost of goods sold were 74% and 77% of net revenues, respectively.

operating expenses for the six months ended June 30, 2025, and 2024 recognized was $4.8 million and $6.4 million, respectively, representing

a 24% decrease.

The decrease in operating expenses was due primarily to management’s cost savings plan and the elimination of

expenses associated wit the legacy business sold in the second quarter of 2025.

and Development – Research and development expenses for the six months ended June 30, 2025, and 2024 totaled $969 thousand

and $856 thousand, respectively.

general and Administrative – Selling, general and administrative expenses for the six months ended June 30, 2025, and 2024

totaled $3.4 million and $4.9 million, respectively, representing a 31% decrease.

The decrease was due primarily to management’s

cost savings initiatives, including headcount reductions and lower professional-services fees, and the removal of expense associated

with the legacy business.

– Depreciation expenses for the six months ended June 30, 2025, and 2024 totaled $36 thousand and $199 thousand, respectively,

representing an 82% decrease.

The decrease is directly related to the reduction in fixed assets following the sale of the legacy business.

amortization – Intangible amortization expenses for the six months ended June 30, 2025, and 2024 totaled $468 thousand

and $458 thousand, respectively.

The modest increase is due the timing of amortization of customer relationships, trade names and other

intangible assets.

income and expenses

Expense – Interest expense for the six months ended June 30, 2025, totaled $403 thousand, compared to $538 thousand for the

six months ended June 30, 2024.

The change in interest expense is attributable to fluctuations in borrowings under the Company’s

credit facilities and the retirement of debt associated with the legacy business.

Other income and expenses include a gain on debt settlement

of $325 thousand recorded in the six months ended June 30, 2025, and $0 in the comparable 2024 period.

operations – On June 30, 2025, the Company completed the sale of its legacy business.

As a result, the assets and liabilities

of the legacy business were classified as held for sale and its results of operations for all periods presented have been reported as

discontinued operations.

For the six months ended June 30, 2025 and 2024, loss from discontinued operations (net of tax) was $1.7 million

and $1.0 million, respectively.

The increase in loss from discontinued operations reflects transaction-related expenses and a one-time

loss on the sale of certain assets.

income (loss) – For the six months ended June 30, 2025, the Company recorded a net loss of $34 thousand, compared with a net

loss of $5.1 million for the six months ended June 30, 2024.

The significant improvement in net results was driven by higher margins

on continuing operations, lower operating expenses and the gain on debt settlement, partially offset by increased loss from discontinued

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.

Balance Sheet Arrangements

Company currently does not have any off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis