NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
the Years Ended December 31, 2020 and 2019
NOTE
1 – NATURE OF OPERATIONS
OMNIQ
Corp., a Delaware corporation, formerly Quest Solution, Inc., together with its wholly owned subsidiaries, referred to herein
as “we,” “us,” and “our” (“OMNIQ” or the “Company”), was incorporated
in 1973. Since its incorporation, the Company has been involved in various lines of business.
From
2008 and to 2013, we were in the business of developing oil and gas reserves. In January 2014, we determined it was in the best
interest of our stockholders to focus on operating companies with a track record of positive cash flows and larger existing revenue
bases. Our strategy developed into leveraging management’s relationships in the business world for investments for the Company.
Since
2014, we have made the following acquisitions resulting in us becoming a leading provider of computerized and machine vision image
processing solutions:
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Quest
Solutions, Inc. (January 2014)
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Bar
Code Specialties, Inc. (November 2014)
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ViascanQdata,
Inc (October 2015 – later sold in September 2016)
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HTS
Image Processing, Inc. (October 2018)
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EyepaxIT
Consulting LLC. (February 2020)
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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 helps our clients move people, assets and data safely and securely through airports, warehouses,
schools, national borders, and many other applications and environments.
We offer end-to-end solutions that
include hardware, software, communications, and full lifecycle management services. We are an established manufacturer and distributor
of barcode labels, tags, and ribbons, as well as RFID labels and tags. 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, transportation and logistics, and oil, gas, and chemicals.
COVID-19
The
outbreak of the COVID-19 pandemic continues to affect the United States of America and the world, including in the primary regions
we operate. Many State Governors issued temporary Executive Orders in 2020, that, among other stipulations, effectively limited
in-person work activities for most industries and businesses having the effect of suspending or severely curtailing operations.
Many of these orders are in the process of being lifted.. To date, we have not incurred any significant interruptions to our day-to-day
operations or supply chain, except some of our employees have or are working remotely. In response to the COVID-19 pandemic, we
proactively implemented certain measures to strengthen cash flow, manage costs, strengthen liquidity and enhance employee safety.
These measures included the reduction of payroll costs, a reduction in capital expenditures and other discretionary spending,
the elimination of most business travel and restriction of visitors to our corporate office, enhanced cleaning and disinfection
procedures at our corporate office and branch locations, promotion of social distancing and the wearing of face coverings (masks)
at our corporate office and branch locations, and requirements for employees to work from home where possible.
As
the impact of COVID-19 became more widespread in March 2020, our sales volumes began to decline from previous years. Our total
revenues for the year ended December 31, 2020, were 3.48% lower than those of the year ended December 31, 2019. COVID-19 had a
more significant impact on our gross margin. Total gross margin percentage dropped 5% for the year ended December 31, 2020 compared
to 2019. The timing and the extent of the continued recovery in our sales volumes cannot be reasonably estimated at this time.
As such, the extent of the ultimate impact of the pandemic on the Company’s operational and financial performance will depend
on various developments, including the duration and spread of the outbreak, the impact on capital and financial markets, governmental
limitations on business operations generally, and its and their impact on potential customers, employees, vendors and distribution
partners, all of which cannot be reasonably predicted at this time.
NOTE
2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation and Basis of Presentation
Our
consolidated financial statements include the financial position and results of operations of OMNIQ Corp. and its wholly owned
subsidiaries Quest Marketing, Inc., Quest Exchange Ltd., and HTS Image Processing, Inc., collectively referred to herein as
“we” or “us” or “our” or the “Company.”
All
significant intercompany accounts and transactions have been eliminated in these consolidated financial statements. Business combinations
are included in the consolidated financial statements from their respective dates of acquisition.
Use
of Estimates
We
prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States
of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of
assets and liabilities and related disclosures at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reported period. These assumptions and estimates could have a material effect on our consolidated
financial statements. Actual results may differ materially from those estimates. We review our estimates on an ongoing basis based
on information currently available, and changes in facts and circumstances may cause us to revise these estimates.
Cash,
Cash Equivalents and Restricted Cash
Cash
consists of petty cash, checking, savings, and money market accounts. For the purpose of the statements of cash flows, all highly
liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2020 and 2019.
The
Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.
The
Company has restricted cash on deposit with a federally insured bank in the amount of $533 thousand at December
31, 2020 and 2019, respectively.
Accounts
Receivable
We manage credit risk associated with
our accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted
for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) and Accounting
Standards Codification Topic 326, Credit Losses (Topic 326)., the discussions below on credit risk and our allowances
for doubtful accounts address our total revenues from Topic 606 and Topic 326.
We
believe concentration of credit risk, with respect to our receivables, is limited because our customer base is comprised of a
number of geographically diverse customers. We manage credit risk through credit approvals, credit limits and other monitoring
procedures.
Pursuant
to Topic 326 for our accounts receivables, we maintain an allowance for doubtful accounts that reflects our estimate of our expected
credit losses. Our allowance is estimated using a loss rate model based on delinquency. The estimated loss rate is based on our
historical experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable
forecasts, and our own judgment as to the likelihood of ultimate payment based upon available data. We perform credit evaluations
of customers and establish credit limits based on reviews of our customers’ current credit information and payment histories.
We believe our credit risk is somewhat mitigated by our geographically diverse customer base and our credit evaluation procedures.
The actual rate of future credit losses, however, may not be similar to past experience. Our estimate of doubtful accounts could
change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers.
Accordingly, we may be required to increase or decrease our allowance for doubtful accounts. Based on management’s evaluation,
accounts receivable has a balance in the allowance for doubtful accounts of $28 thousand and $36 thousand for the years ended
December 31, 2020 and 2019, respectively.
Inventory
Substantially
all inventory consists of raw materials and finished goods and are valued at the lower of actual cost or net realizable
value; where net realizable value is considered to be estimated selling price in the ordinary course of business, less reasonably
predictable cost of completion, disposal and transportation.
Property
and Equipment
Property
and equipment are recorded at cost and depreciated using both straight-line over the estimated useful lives. Ordinary repair
and maintenance costs are included in sales, general and administrative (“SG&A”) expenses on our consolidated
statements of operations. However, expenditures for additions or improvements that significantly extend the useful life of
the asset are capitalized in the period incurred. At the time assets are sold or disposed of, the cost and accumulated
depreciation are removed from their respective accounts and the related gains or losses are reflected in the statements of
operations in gains from sales of property and equipment, net.
We
periodically evaluate the appropriateness of remaining depreciable lives assigned to property and equipment. Leasehold improvements
are amortized using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is
shorter.
Depreciation expense for the years ended December 31, 2020 and 2019 was $178 thousand and $151 thousand, respectively. Generally,
we assign the following estimated useful lives to these categories:
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Category
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Estimated
Useful Life
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Furniture
and fixtures
Computer
equipment
Office
equipment
Software
Leasehold
improvements
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5
to 7 years
3
to 5 years
3
to 10 year
3
years
15
years
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Fair
Value of Financial Instruments
Fair
value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The FASB fair value measurement guidance established a fair value hierarchy
that prioritizes the inputs used to measure fair value. The three broad levels of the fair value hierarchy are as follows:
Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level
2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability,
either directly or indirectly
Level
3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions
Assets and liabilities are classified
based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification
on a quarterly basis. Changes in the observable inputs may result in a reclassification of assets and liabilities within the three
levels of the hierarchy outlined above.
The carrying amounts of certain financial
instruments, such as cash equivalents, short term investments, accounts receivable, accounts payable and accrued liabilities,
approximate fair value due to their relatively short maturities.
Goodwill
and Intangibles
We
have made acquisitions in the past that resulted in the recognition of goodwill. Goodwill is the excess of the consideration transferred
plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable
net assets acquired. We evaluate goodwill for impairment annually or more frequently, if triggering events occur or other impairment
indicators arise which might impair recoverability.
Application
of the goodwill impairment test requires judgment. We performed a Step 1 quantitative assessment of goodwill impairment as of
December 31, 2020, our annual impairment test date. We compared the carrying value inclusive of goodwill and definite-lived
intangible assets, to its fair value. We estimated the fair value of these reporting units by weighting results from the income
approach and the market approach, as further described below. Based on this quantitative test, we determined there was no impairment
as of the December 31, 2020.
For
purposes of performing the quantitative impairment test described above, we estimate the fair value by utilizing fair value techniques
consistent with the income approach and market approach. When performing the income approach for each reporting unit, we use a
discounted cash flow analysis based on our internal projected results of operations, weighted average cost of capital (“WACC”)
and terminal value assumptions. Our cash flow projections are based on five-year financial forecasts developed by management that
include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth.
The WACC is an estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise and
represents the expected cost of new capital likely to be used by market participants. The WACC is used to discount our combined
future cash flows. The inputs and variables used in determining the fair value of a reporting unit require management to make
certain assumptions regarding the impact of operating and macroeconomic changes, as well as estimates of future cash flows. Our
estimates regarding future cash flows are based on historical experience and projections of future operating performance, including
revenues, margins and operating expenses. We also make certain forecasts about future economic conditions, interest rates and
other market data. Many of the factors used in assessing fair value are outside the control of management, and these assumptions
and estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of a reporting
unit’s fair value, and therefore could affect the likelihood and amount of potential impairment. Under the market approach,
we compare the reporting units to selected reasonably similar (or “guideline”) publicly-traded companies. Under this
method, valuation multiples are: (i) derived from the operating data of selected guideline companies; (ii) evaluated and adjusted
based on the strengths and weaknesses of our reporting unit relative to the selected guideline companies; and (iii) applied to
the operating data of our reporting unit to arrive at an indication of value. The application of the market approach results in
an estimate of the price reasonably expected to be realized from a sale of the Company.
Identifiable
intangible assets are stated at cost, net of accumulated amortization. The assets are being amortized on the straight-line method
over useful lives ranging from 3 to 11 years.
Leases
We
adopted ASU 2016-02, Leases (Topic 842): effective January 1, 2019. We determine whether an
arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract. A contract contains
a lease if there is an identified asset and we have the right to control the asset for a period of time in exchange for consideration.
Lease arrangements can take several forms. Some arrangements are clearly within the scope of lease accounting, such as a real
estate contract that provides an explicit contractual right to use a building for a specified period of time in exchange for consideration.
However, the right to use an asset can also be conveyed through arrangements that are not leases in form, such as leases embedded
within service and supply contracts. We analyze all arrangements with potential embedded leases to determine if an identified
asset is present, if substantive substitution rights are present, and if the arrangement provides the customer control of the
asset.
Our
lease portfolio is substantially comprised of operating leases related to leases of real estate and improvements. From time to
time, we may also lease various types of small equipment and vehicles.
Operating
lease right-of-use (“ROU”) assets represent our right to use an individual asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized
at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide
the lessor’s implicit rate, we use our incremental borrowing rate (“IBR”) at the commencement date in determining
the present value of lease payments by utilizing a fully collateralized rate for a fully amortizing loan with the same term as
the lease.
Lease
terms include options to extend the lease when it is reasonably certain those options will be exercised. For leases with terms
greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. Our leases
can include rental escalation clauses, renewal options and/or termination options that are factored into our determination of
lease payments when such renewal options and/or termination options are reasonably certain of exercise.
A
ROU asset is subject to the same impairment guidance as assets categorized as plant, property, and equipment. As such, any impairment
loss on ROU assets is presented in the same manner as an impairment loss recognized on other long-lived assets.
A
lease modification is a change to the terms and conditions of a contract that change the scope or consideration of a lease. For
example, a change to the terms and conditions to the contract that adds or terminates the right to use one or more underlying
assets, or extends or shortens the contractual lease term, is a modification. Depending on facts and circumstances, a lease modification
may be accounted as either: (1) the original lease plus the lease of a separate asset(s) or (2) a modified lease. A lease will
be remeasured if there are changes to the lease contract that do not give rise to a separate lease.
Purchase
Accounting and Business Combinations
We
account for our business combinations using the purchase method of accounting which requires that intangible assets be recognized
apart from goodwill if they are contractual in nature or separately identifiable. Acquisitions are measured on the fair value
of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration
given or the fair value of the assets acquired, whichever is more reliably measurable. The excess of cost of an acquired entity
over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill.
The
valuation and allocation processes rely on significant assumptions made by management. In certain situations, the allocations
of excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision
when we receive updated information, including appraisals and other analyses, which are completed within one year of the acquisition.
Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from
the acquisition date.
Revenue
Recognition.
When
entering into contracts with our customers, we review follow the five steps outline in Accounting Standards Codification Topic
606, Revenue from Contracts with Customers (Topic 606):
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i.
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Identify
the contract with our customer.
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ii.
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Identify
the performance obligations in the contract.
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iii.
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Determine
the transaction price.
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iv.
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Allocate
the transaction price to the performance obligations. And
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v.
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Evaluate
the satisfaction of the performance obligations,
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We
account for contracts, with our customers, when we have approval and commitment from both parties, the rights of the parties are
identified, payment terms are established, the contract has commercial substance and collectability of consideration is probable.
We
evaluate, in accordance with Topic 606, whether we meet the criteria to be a principal or an agent and record the revenue on a
gross or net basis. We are considered a principal if we obtain control of any one of the following:
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i.
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A
good or another asset from another party that we then transfer to our customer.
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ii.
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A
right to a service to be performed by another party, which gives the us the ability to direct that party to provide the service
to the customer on our behalf, and
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iii.
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A
good or service from another party that we then combine with other goods or services in providing the specified good or service
to our customer.
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We
have certain relationships with manufacturers and suppliers to sell us products or provide services. Our contracts may transfer
to our customer a right to a future service or product to be provided by our manufacturer or supplier. When a specified good or
service is a right to a good or service is provided by a manufacturer or supplier, we evaluate whether we control the right to
the goods or services before that right is transferred to the customer rather than whether we control the underlying goods or
services.
Indicators
that we control the specified good or service before it is transferred to the customer (and we are therefore a principal) include,
but are not limited to, the following:
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i.
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We
are responsible for fulfilling the promise to provide the specified good or service. This typically includes responsibility
for the acceptability of the specified good or service. If we are primarily responsible for fulfilling the promise to provide
the specified good or service, this may indicate that the other party involved in providing the specified good or service
is acting on our behalf. Often, we provide value added services (combining hardware, integrating hardware to software, etc.)
to the products and services purchased from our manufacturers and suppliers.
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ii.
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We
have inventory risk before the specified good or service has been transferred to a customer. Our purchases of products or
services from our manufactures and suppliers is evidenced by our issuing a binding purchase order contract with the negotiated
terms including specifications, pricing, delivery among other things. Our obligation for purchased products and services is
mutually exclusive of our customers’ performance (failure to take acceptance, make payment, etc.
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iii.
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We
have sole discretion in establishing our price for the specified good or service. Establishing the price our customer pays
for a specified good or service may indicate we have the ability to direct the use of that good or service and obtain substantially
all of the remaining benefits. We control and set the pricing for the product or services to be provided to our customers.
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If
the terms of a transaction do not indicate we are acting as a principal in the transaction, we are then considered acting as an
agent and the associated revenues would be recognized on a net basis.
As
principal, when (or as) we satisfy a performance obligation, we recognize revenue in the gross amount of consideration which we
expect to be entitled in exchange for the specified good or service transferred. We are an agent if our performance obligation
is to arrange for the provision of the specified good or service by another party. As an agent, we do not control the specified
good or service provided by another party before that good or service is transferred to our customer. As an agent, when (or as)
we satisfy a performance obligation, we recognize revenue in the amount of any fee or commission which we expect to be entitled
in exchange for arranging for the specified goods or services to be provided by another party to our customer.
Under
Topic 606, we recognize revenue (on either a gross or net basis previously discussed) only when we satisfy a performance obligation
by transferring a promised good or service to our customer. A good or service is considered to be transferred when the customer
obtains control. The standard defines control as an entity’s ability to direct the use of, and obtain substantially all
of the remaining benefits from, an asset. We recognize revenue (either gross or net) once control has passed to the customer.
The following indicators are evaluated in determining when control has passed to the customer:
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i.
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We
have a right to payment for the product or service,
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ii.
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The
customer has legal title to the product,
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iii.
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We
have transferred physical possession of the product to the customer,
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iv.
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The
customer has the risk and rewards of ownership of the product, and
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v.
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The
customer has accepted the product.
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Revenue
Recognition for Hardware. Revenues from sales of hardware products are recognized on a gross basis as we are acting as a principal
in these transactions, with the selling price to the customer recorded as sales and the acquisition cost of the product recorded
as cost of sales. We recognize revenue from these transactions when control has passed to the customer.
Manufacturers
and suppliers, from whom we purchase hardware, often provide their warranties only providing assurance the products and services
will conform to their specifications. These assurance type warranties are not sold separately and are not considered separate
performance obligations. In some transactions, a third-party will provide the customer with an extended warranty. These extended
warranties are sold separately and provide the customer with a service in addition to assurance that the product will function
as expected. We consider these warranties to be separate performance obligations from the underlying product. For warranties,
where we are arranging those services be provided by a third-party, we are acting as an agent in the transaction and records revenue
on a net basis at the point of sale.
Revenue
Recognition for Software. Sales of software licenses are generally considered a single performance obligation. When we are
considered to be the principal, we recognize revenues on a gross basis at the point the software is delivered to and accepted
by our customer. Generally, software licenses are sold with accompanying third-party delivered software assurance, which is a
product that allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during
the period that the software assurance is in effect.
As
explained above, we evaluate whether the software assurance is a separate performance obligation by assessing if the third-party
delivered software assurance is critical or essential to the core functionality of the software itself. This involves considering:
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i.
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If
the software provides its original intended functionality to the customer without the updates,
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ii.
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If
the customer would ascribe a higher value to the upgrades versus the up-front deliverable,
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iii.
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If
the customer would expect frequent intelligence updates to the software (such as updates that maintain the original functionality),
and
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iv.
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If
the customer chooses to not delay or always install upgrades.
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If
we determine the accompanying third-party delivered software assurance is critical or essential to the core functionality of the
software license, the software license and the accompanying third-party delivered software assurance are recognized as a single
performance obligation.
In
some transactions, a third-party will provide the customer with an extended warranty. These extended warranties are sold separately
and provide the customer with a service in addition to assurance that the product will function as expected. We consider these
warranties to be separate performance obligations from the underlying product. For warranties, where we are arranging those services
be provided by a third-party, we are acting as an agent in the transaction and records revenue on a net basis at the point of
sale.
Revenue
Recognition for Services. We provide professional services, which include project managers and consultants recommending, designing
and implementing IT solutions. Revenue from professional services is recognized either on a time and materials basis or proportionally,
as costs are incurred for fixed fee project work. Revenue is recognized on a gross basis each month as work is performed and we
transfers those services.
Revenues
from the sale of professional and support services, provided by us, are recognized over the period the service is provided. As
the customer receives the benefit of the service each month, we recognize the respective revenue on a gross basis as we are acting
as a principal in the transaction. Additionally, we manage services team provides project support to customers that are billed
on a fixed fee basis. We are acting as the principal in the transaction and recognize revenue on a gross basis based on the total
number of hours incurred for the period over the total expected hours for the project. Total expected hours to complete the project
is updated for each period and best represents the transfer of control of the service to the customer.
Freight
Costs. We record both the freight billed to its customers and the related freight costs as cost of sales when the underlying
product revenue is recognized. For freight not billed to its customers, we record the freight costs as cost of sales. The Company
considers shipping to be a fulfillment activity and not a separate performance obligation.
Reverse
Stock Split
Effective
November 20, 2019, we implemented a one-for-20 reverse stock split of the Company’s common stock. The par value of common
stock and the number of authorized shares were not adjusted as a result of the reverse stock split. All share and per share amounts
in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this
reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in
capital. As a result of the Reverse Split, proportionate adjustments have been made to the per share exercise price and/or the
number of shares issuable upon the exercise or vesting of all stock options and warrants issued by the Company and outstanding
immediately prior to the Effective Time, which resulted in a proportionate decrease in the number of shares of the Company’s
common stock reserved for issuance upon exercise or vesting of such stock options, Preferred stock, restricted stock units
and warrants, and, in the case of stock options and warrants, a proportionate increase in the exercise price of all such stock
options and warrants. In addition, the number of shares authorized for future grant under the Company’s equity incentive/compensation
plans immediately prior to the Effective Time was reduced proportionately.
Stock-Based
Compensation
We
periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions for services
and for financing costs. We account for stock option and warrant grants issued and vesting to employees based on the authoritative
guidance provided by Financial Accounting Standards Board (the “FASB”) where the value of the award is measured on
the date of grant and recognized as compensation expense on the straight-line basis over the vesting period.
We
record stock-based compensation expense according to the provisions of ASC Topic 718, Compensation – Stock Compensation.
ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in
the financial statements based on their fair values. Under the provisions of ASC Topic 718, the Company determines the appropriate
fair value model to be used for valuing share-based payments and the amortization method for compensation cost.
The
fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company
estimates the expected volatility and expected option life assumption consistent with ASC Topic 718, Compensation – Stock
Compensation. The expected volatility of the Company’s common stock at the date of grant is estimated based on a historic
volatility rate and the expected option life is calculated based on historical stock option experience as the best estimate of
future exercise patterns. The dividend yield assumption is based on historical and anticipated dividend payouts. The risk-free
interest rate assumption is based on observed interest rates consistent with the expected life of each stock option grant. The
Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for
those awards that are expected to vest. Compensation expense is recorded for all stock options expected to vest based on the amortization
of the fair value at the date of grant on a straightline basis primarily over the vesting period of the options.
In
August 2020, the Board of Directors approved our 2020 Equity Incentive Plan and later amended it. In September 2020, our
shareholders adopted and ratified the 2020 Equity Incentive Plan. The total number of shares of Common Stock authorized for issuance
under the 2020 Plan is 1,000,000.
Equity
instruments issued to parties other than employees for acquiring goods or services
The
Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance
of section 505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”). Pursuant to FASB
ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever
is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier
of the date on which the performance is complete or the date on which it is probable that performance will occur.
Warrants
The
fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the
input of subjective assumptions, including the expected term of the warrants, expected stock price volatility, and expected dividends.
These estimates involve inherent uncertainties and the application of management’s judgment. Expected volatilities used
in the valuation model are based on the average volatility of the Company’s stock. The risk-free rate for the expected term
of the option is based on the United States Treasury yield curve in effect at the time of grant.
Advertising
The
Company expenses marketing and advertising costs as incurred. During 2020 and 2019, the Company spent $283 thousand
and $224 thousand, respectively, on marketing, trade show and store front expense and advertising, net of co-operative rebates.
The
Company received rebates on advertising from co-operative advertising agreements with several vendors and suppliers. These rebates
have been recorded as a reduction to the related advertising and marketing expense.
Foreign
Currency Translation
Our
consolidated financial statements are presented in U.S. dollars. The functional currency for the Company is U.S. dollars. Transactions
in currencies other than the functional currency are recorded using the appropriate exchange rate at the time of the transaction.
All of our continuing operations are conducted in U.S. dollars except its subsidiary located in Israel. The records of the Israeli
operation were maintained in the local currency and re-measured to the functional currency as follows: monetary assets and liabilities
are converted using the balance sheet period-end date exchange rate, while the non-monetary assets and liabilities are converted
using the historical exchange rate. Expenses and income items are converted using the weighted average exchange rates for the
reporting period. Foreign transaction gains and losses are reported on the consolidated statement of operations and were included
in the amount of loss from comprehensive income.
Income
Taxes
We
account for our income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred
tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in operations in the period that includes the enactment date.
Income
tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences
between assets and liabilities recognized for consolidated financial reporting purposes and such amounts recognized for tax purposes
and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse.
We
also follow the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the
Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would
more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the
amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement with the relevant tax authority.
Our
income is subject to taxation in both the U.S. and a foreign jurisdiction, Israel. Significant judgment is required in evaluating
the Company’s tax positions and determining its provision for income taxes. The Company establishes reserves for income
tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves
for tax contingencies are established when the we believe positions do not meet the more-likely-than-not recognition threshold.
We adjust uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse
of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities
that are considered appropriate.
Comprehensive
Income (Loss)
Comprehensive
income (loss) is defined as a change in equity of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments
by owners and distributions to owners. Our other comprehensive income (loss) is composed of foreign currency translation adjustments.
Net
Loss Per Common Share
See
NOTE 14 regarding our 1-for-20 reverse stock split. Share related amounts have been retroactively adjusted in this report
to reflect this reverse stock-split for all periods presented.
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 years ended December 31, 2020 and December 31, 2019 were 4,322,303 and 3,889,478,
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:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
Options to purchase common stock
|
|
|
1,553
|
|
|
|
737
|
|
|
Convertible preferred stock
|
|
|
-
|
|
|
|
242
|
|
|
Warrants to purchase common stock
|
|
|
75
|
|
|
|
225
|
|
|
Potential shares excluded from diluted net loss per share
|
|
|
1,628
|
|
|
|
1,204
|
|
Reclassifications
and Comparability
Certain
amounts in the financial statements of prior years have been reclassified to conform to the current year presentation for comparative
purposes. This had no effect on total assets or net income.
Recent
Accounting Pronouncements
Pronouncements
Not Yet Adopted
In
December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying
the Accounting for Income Taxes (“ASU 2019-12”). The guidance removes the following exceptions: 1) exception to the
incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from
other items, 2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign
subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign
subsidiary when a foreign equity method investment becomes a subsidiary and 4) exception to the general methodology for calculating
income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Additionally, the guidance
simplifies the accounting for income taxes by: 1) requiring that an entity recognize a franchise tax (or similar tax) that is
partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2)
requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination
in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that
an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not
subject to tax in its separate financial statements (although the entity may elect to do so (on an entity-by-entity basis) for
a legal entity that is both not subject to tax and disregarded by the taxing authority), 4) requiring that an entity reflect the
effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes
the enactment date and 5) making minor improvements for income tax accounting related to employee stock ownership plans and investments
in qualified affordable housing projects accounted for using the equity method. ASU 2019-12 became effective on January 1, 2021
and is not expected to have a material impact on our consolidated financial statements.
In
March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited time to ease the potential
burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London
Interbank Offered Rate (“LIBOR”) on financial reporting. The guidance provides optional expedients and exceptions
for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria
are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The amendments
of this ASU should be applied on a prospective basis. We intend to continue to monitor the developments with respect to the planned
phase-out out of LIBOR after 2021 and work with our lenders to seek to ensure any transition away from LIBOR will have minimal
impact on our financial condition. However, we can provide no assurances regarding the impact of the discontinuation of LIBOR
as there can be no assurances as to whether such replacement or alternative base rate will be more or less favorable than LIBOR.
Our exposure related to the expected cessation of LIBOR is limited to the interest expense we incur on balances outstanding under
our Credit Facility. The potential impact from the cessation of LIBOR as a reference rate, as well as the applicability of ASU
2020-04, is not currently estimable.
Recently
Adopted Accounting Pronouncements
On
January 1, 2020, we adopted Accounting Standards Codification Topic 326, Credit Losses (Topic 326). This standard establishes
an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather
than incurred losses. Under the new guidance, we recognize an allowance for our estimate of expected credit losses over the entire
contractual term of our receivables from the date of initial recognition of the financial instrument. Measurement of expected
credit losses are based on relevant forecasts that affect collectability. Topic 326 applies to trade receivables from certain
revenue transactions including receivables from equipment sales, parts and service sales. Under Accounting Standard Codification
Topic 606 (Revenue from Contracts with Customers), revenue is recognized when, among other criteria, it is probable that the
entity will collect the consideration to which it is entitled for goods or services transferred to a customer. At the point that
these trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses over their
contractual life are recorded at inception based on historical information, current conditions, and reasonable and supportable
forecasts. The adoption of Topic 326 did not have a material impact on our consolidated financial statements and related disclosures
or our existing internal controls because accounts receivable are of short duration and there is not a material difference between
incurred losses and expected losses.
On
January 1, 2020, we adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework. ASU 2018-13 modifies the disclosure
requirements for fair value measurements. Entities are no longer required to disclose the amount of and reasons for transfers
between Level 1 and Level 2 of the fair value hierarchy, but public companies are required to disclose the range and weighted
average used to develop significant unobservable inputs for Level 3 fair value measurements. The adoption of ASU 2018-13 did not
have a material impact on our consolidated financial statements and footnotes.
NOTE
3 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. As of December
31, 2020, we had a working capital deficit of $25.3 million and an accumulated deficit of $56.7 million. These facts
and others raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation
as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis.
Management’s
plan to eliminate the going concern situation includes, but is not limited to, the following:
|
|
●
|
The
continuation of improving cash flow by maintaining moderate cost reductions (subsequent to aggressive cost reduction actions implemented
in previous years);
|
|
|
|
|
|
|
●
|
Increasing
the accounts receivable factoring line of credit;
|
|
|
|
|
|
|
●
|
Negotiating
lower interest rates on outstanding debt;
|
|
|
|
|
|
|
●
|
Potential
issuances of additional common stock;
|
|
|
|
|
|
|
●
|
The
creation of additional sales and profits across its product lines, and the obtaining of sufficient financing to restructure
current debt in a manner more in line with the Company’s improving cash flow and cost reduction successes;
|
|
|
|
|
|
|
●
|
In our portfolio of products, we have a computer
vision technology that is based on AI and machine learning concepts. These solutions have a higher gross profit that will
provide an increase in cashflow on a consolidated basis going forward. The Company has an operating facility with the
ability for light manufacturing and assembling components, which helps reduce the cost of goods and increase profit margins;
|
|
|
|
|
|
|
●
|
In
April 2019, the Company raised approximately $5.0 million in gross proceeds from the sale of 833,333 shares of the Company’s
common stock.
|
NOTE
4 – BUSINESS ACQUISITION
In
February 2020, (the “Closing Date”), we entered into an Asset Purchase Agreement (the “Eyepax Agreement”),
with Eyepax IT Consulting, LLC (the “Seller”); whereby, we acquired Seller’s accounts receivable and the license,
ownership rights and source code of the parking Enforcement and Revenue Control System. The Company also assumed the Seller’s
accounts payable liabilities. Pursuant to the terms of the Eyepax Agreement, the purchase price paid was to be paid as follows:
|
|
1.
|
$100,000
was paid on the Closing Date, less $5,000 previously paid as an advance payment, accordingly the remaining balance paid in
cash on Closing Date was $95,000.
|
|
|
|
|
|
|
2.
|
$25,000
per month for three months to be paid on or before the last business day of the month beginning with the first month after
the Closing Date, and a fourth payment of $20,000 until a total of $95,000 has been made.
|
|
|
|
|
|
|
3.
|
Beginning
on the first month after Closing Date, $5,000 per month to be paid in ten (10) monthly installments.
|
|
|
|
|
|
|
4.
|
80,000
shares of the Company’s common stock in the name of the Seller, were issued during 45 days from Closing Date at $5.50
per common share.
|
|
|
|
|
|
|
5.
|
Stock
options to purchase 20,000 shares of the Company’s common stock at an exercise price of $5.00 per share. The option
shares vest in equal quarterly periods, expiring in February 2023.
|
The
purchase price was measured at fair value on the Closing Date as follows (in thousands):
|
Cash payments to Seller
|
|
|
245
|
|
|
Subscribed common stock
|
|
|
440
|
|
|
Stock purchase options
|
|
|
91
|
|
|
Total
|
|
|
776
|
|
The
assets acquired and liabilities assumed have been recognized at the Closing date and were measured at fair value as follows (in
thousands):
|
Accounts receivable
|
|
|
13
|
|
|
Software (intangible)
|
|
|
100
|
|
|
Liabilities assumed
|
|
|
(113
|
)
|
|
Net assets acquired at fair value
|
|
|
1
|
|
|
Total purchase price
|
|
|
775
|
|
|
Goodwill recognized
|
|
|
774
|
|
We
estimated the fair value the stock purchase option using the Black-Scholes option valuation model which incorporates assumptions
as to stock price volatility, the expected life of the options, risk-free interest rate and dividend yield. In valuing these options,
the Company assumed a cumulative stock volatility of 269.42%, 36 months expected life, and a risk-free interest rate of 1.160%
and dividend yield of 0%.
NOTE
5 – ACCOUNTS RECEIVABLE
Accounts
receivable consisted of the following as of December 31:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
Trade Accounts Receivable
|
|
$
|
9,689
|
|
|
$
|
6,730
|
|
|
Less Allowance for doubtful accounts
|
|
|
(28
|
)
|
|
|
(36
|
)
|
|
Total Accounts Receivable (net)
|
|
$
|
9,661
|
|
|
$
|
6,694
|
|
For
the years ended December 31, 2020 and 2019, one customer accounted for 37.2% and 12.3%, respectively,
of the Company’s revenues.
Accounts
receivable at December 31, 2020 and 2019 are made up of trade receivables due from customers in the ordinary course
of business. One customer represented 35.4% of the balance of accounts receivable at December 31, 2020
and two customers made up 20.9% of the accounts receivable balance at December 31 for 2019, which represented
greater than 10% of total accounts receivable at December 31, 2020 and 2019, respectively.
NOTE
6 – INVENTORY
Inventory
consisted of the following as of December 31:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Raw Materials
|
|
|
946
|
|
|
|
1,055
|
|
|
Work in process
|
|
|
-
|
|
|
|
44
|
|
|
Finished goods (less Allowance)
|
|
|
561
|
|
|
|
790
|
|
|
Total inventories
|
|
$
|
1,507
|
|
|
$
|
1,889
|
|
NOTE
7 – GOODWILL AND INTANGIBLE ASSETS
We
have made acquisitions in the past that resulted in the recognition of goodwill. Based on our analysis there have been
no impairment charges recorded against goodwill in 2020 and 2019. Identifiable intangible assets are stated at cost,
net of accumulated amortization. The assets are being amortized on the straight-line method over the estimated useful lives
ranging from 3 to 11 years. Amortization expense for the years ended December 31, 2020 and 2019 was $2.1 million
and $2.0 million, respectively.
Goodwill
and Intangible assets consisted of the following as of December 31:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
Goodwill
|
|
$
|
14,695
|
|
|
$
|
13,921
|
|
|
Trade Names
|
|
|
4,390
|
|
|
|
4,390
|
|
|
Customer Relationships
|
|
|
12,590
|
|
|
|
12,590
|
|
|
Intellectual property
|
|
|
1,424
|
|
|
|
1,323
|
|
|
Accumulated amortization
|
|
|
(11,855
|
)
|
|
|
(9,695
|
)
|
|
Intangibles, net
|
|
$
|
21,244
|
|
|
$
|
22,529
|
|
The
future amortization expense on the Customer Relationships, and IP are as follows:
|
In thousands
|
|
|
|
|
Years ending December 31,
|
|
|
|
|
2021
|
|
|
2,133
|
|
|
2022
|
|
|
1,507
|
|
|
2023
|
|
|
934
|
|
|
2024
|
|
|
487
|
|
|
2025
|
|
|
472
|
|
|
Thereafter
|
|
|
1,016
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,549
|
|
Goodwill
is not amortized but is evaluated for impairment annually or when indicators of a potential impairment are present. The impairment
testing of goodwill is performed separately from our impairment testing of intangibles. The annual evaluation for impairment of
goodwill and intangibles is based on valuation models that incorporate assumptions and internal projections of expected future
cash flows and operating plans. None of the goodwill is deductible for income tax purposes.
Purchased
intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method
for customer relationships and trade names) to their estimated residual values, if any. The Company’s finite-lived intangible
assets consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being
amortized over periods ranging from two to nine years. Purchased intangible assets are reviewed annually to determine if facts
and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may
not be recoverable. If such facts and circumstances exist, recoverability is assessed by comparing the projected undiscounted
net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying
amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful
life is shorter than originally estimated, the rate of amortization is accelerated, and the remaining carrying value is amortized
over the new shorter useful life. No impairments were identified or changes to estimated useful lives have been recorded as of
December 31, 2020 and 2019.
NOTE
8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable are made up of payables due to vendors in the ordinary course of business at December 31, 2020 and 2019. One vendor made
up 92.4% and 83.0% of our accounts payable in 2020 and 2019, respectively, which represented greater than 10% of total
accounts payable at December 31, 2020 and 2019, respectively.
NOTE
9 – 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 working
capital.
In
July 2016, we entered into a Factoring and Security Agreement (the “FASA”) with Action Capital Corporation (“Action”)
to establish a sale of accounts receivable credit facility, whereby we may obtain short-term financing by selling and assigning
acceptable accounts receivable to Action. Pursuant to the FASA, the outstanding principal amount of advances made by Action at
any time shall not exceed $5.0 million. Action reserves and withholds to 5% of the face amount of each account purchased in a
reserve account. As of December 31, 2020 and 2019, the balance outstanding was $4,914 thousand and $1,365 thousand,
respectively.
The
annual interest rate with respect to the daily average balance of unpaid advances outstanding under the FASA (computed on a monthly
basis) is equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 2.0%, plus a monthly fee equal to 0.75% of the average
outstanding balance. we also pay all other costs incurred by Action under the FASA, including all bank fees. The FASA continues
in full force and effect unless terminated by either party upon 30 days’ prior written notice. The FASA credit facility
is collateralized with a security interest in certain assets of the Company. The FASA includes customary representations
and warranties and default provisions for transactions of this type.
NOTE
10 – RELATED PARTY NOTES PAYABLE
Related
party notes payable, consisted of the following as of December 31:
|
|
|
2020
|
|
|
2019
|
|
|
In thousands
|
|
|
|
|
|
|
|
|
|
Note payable –Marin
|
|
$
|
660
|
|
|
$
|
900
|
|
|
Note payable –Thomet
|
|
|
413
|
|
|
|
563
|
|
|
Note payable –Zicman
|
|
|
-
|
|
|
|
135
|
|
|
Note payable–Shareholder Convertible Note
|
|
|
43
|
|
|
|
150
|
|
|
Note payable - RWCC
|
|
|
-
|
|
|
|
449
|
|
|
Total notes payable
|
|
|
1,116
|
|
|
|
2,197
|
|
|
Less current portion
|
|
|
433
|
|
|
|
1,025
|
|
|
Long-term portion
|
|
$
|
683
|
|
|
$
|
1,172
|
|
For
the years ended December 31, 2020 and December 31, 2019, the Company recorded interest expense in connection with these notes
in the amount of $15 thousand and $49 thousand, respectively.
Note
Payable -Marin
In
December 2017, we entered into a $660 thousand, 1.89% annual interest rate note payable (the “Marin Note”) with two
individuals from whom we previously acquired their company (in 2014). The Marin Note is payable in 60 monthly principal payments
of $20 thousand beginning in October 2018. Accrued interest payable as of December 31, 2020, was $56 thousand. Accrued interest
is payable at maturity.
Note
Payable – Thomet
In
December 2017, we entered into a $750 thousand, zero percent annual interest rate note payable (the “Thomet Note”)
with an individual from whom we previously acquired his company (in 2014). The Thomet Note is payable in 60 monthly principal
payments of $13 thousand beginning in October 2018.
Note
Payable – Zicman
In
February 2018, we entered into a $180 thousand note payable Zicman. In May 2020, the Company and Zicman entered into a conversion
agreement (the “Conversion Agreement”) whereby Zicman agreed to convert the principal outstanding on the note as of
May 2020, into OMNIQ common stock ($0.001 par value). The total principal and interest outstanding as of May 2020 was $168 thousand
which was converted, in accordance with the Conversion Agreement, into 24,000 shares of OMNIQ common stock.
Note Payable – Shareholder
Convertible Note
In
October 2018, we entered into a $700 thousand, 6% annual interest rate convertible note payable (the “Shareholder Convertible
Note”) with Walefar and Campbeltown (collectively the “Holders”), in connection with the HTS Image Processing,
Inc. Mr Shai Lustgarten, our Chief executive Officer and Director is the principal shareholder in Walefar. Mr. Carlos J. Nissensohn,
a consultant and significant shareholder in OMNIQ, is the principal shareholder in Campbeltown.
The
Shareholder Convertible Note provided Holders a right , at any time on or after the loan origination date, to convert all or any
portion of the then outstanding and unpaid principal amount and interest (including any Default Interest) into fully paid and
non-assessable shares of OMNIQ’scommon stock.The number of conversion shares to be issued upon each conversion of the note
shall be determined by dividing the conversion amount by the applicable conversion price then in effect on the date specified
in the notice of conversion delivered us by the Holder. The conversion rate was set at $4.72 per share.
In
April 2019, and in accordance with the Convertible Shareholder Note, the Holders converted $400 thousand ($200 thousand each)
of unpaid principal outstanding. The Holders received 87,476 (42,373 each) common stock shares and 87,476 (42,373 each) in common
stock warrants.
In
September 2019, and in accordance with the terms of the Convertible Shareholder Note, the Holders, exercised the right to convert
$150 thousand ($75 thousand each) in unpaid principal balance into fully paid and non-assessable shares of our common stock at
a conversion price of $4.72. Accordingly, the Company issued 31,780 common shares (15,890 shareseach) to the Holders.
Note payable
– RWCC
We acquired the Note Payable –
RWCC (“RWCC Note”) with the acquisition of HTS. The RWCC Note was a non-interest-bearing note. The RWCC Note was historically
discounted using an effective interest rate of 5.0%. As of December 3, 2020, this note is paid off. The RWCC Note was classified
as a related party note because the Chief Executive Officer of RWCC is the son of a significant shareholder of the Company and
a sibling to the Chief Financial Officer.
The
repayment of the notes payable, related parties as of December 31, 2020, is as follows for the years ending December 31, 2020:
In
thousands
|
2021
|
|
|
433
|
|
|
2022
|
|
|
390
|
|
|
2023
|
|
|
293
|
|
|
2024
|
|
|
|
|
|
Thereafter
|
|
|
-
|
|
|
Total
|
|
$
|
1,116
|
|
NOTE
11 – OTHER NOTES PAYABLE
Other
notes payable consists of the following as of December 31, 2020:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
Note Payable - Secured Supplier Note
|
|
$
|
6,443
|
|
|
$
|
6,490
|
|
|
Notes Payable - other
|
|
|
7
|
|
|
|
150
|
|
|
Total
|
|
|
6,450
|
|
|
|
6,640
|
|
|
Less current portion
|
|
|
6,449
|
|
|
|
6,497
|
|
|
Long Term Notes Payable
|
|
$
|
1
|
|
|
$
|
143
|
|
Future
maturities of notes payable are as follows for the years ending December 31, 2020:
In
thousands
|
2021
|
|
$
|
6,449
|
|
|
2022
|
|
|
1
|
|
|
Thereafter
|
|
|
-
|
|
|
Total
|
|
$
|
6,450
|
|
Paycheck Protection Program Note Payable
In May 2020, we entered into a Loan Agreement with Zions Bank corporation, NA (“Zions”) whereby
we borrowed $887,500 from Zions under the Small Business Administration’s (the “SBA”) Paycheck Protection Program.
In October 2020, OMNIQ applied for and was granted forgiveness of the full amount owed (including accrued interest) by Zions on
behalf of the SBA. We recognized a gain on forgiveness of debt of $887,500; included in early other (expenses) income on the consolidated
statements of operations.
Supplier
Secured Note Payable
In
July 2016, we and a supplier entered into a secured promissory note (the “Secured Supplier Note”), in the principal
amount of $12.5 million and interest at 12% per annum. The Secured Supplier Note was to be paid in six consecutive monthly
installments of a minimum principal amount of $250 thousand each principal and accrued interest, , with any remaining principal
and accrued interest due and payable on December 31, 2016.
From
November 2016 through March 2019, the Secured Supplier Note was amended six times (the “Amendments”), each time adjusting
the payment terms and maturity date.
In
April 2019, we entered into a seventh amendment extending the maturity date to July 31, 2019. This amendment requires we make
three installment payments as follows:
|
|
●
|
First,
a minimum payment in the amount $350 thousand plus all accrued interest on the principal due by May 15, 2019;
|
|
|
●
|
Second,
a minimum payment in the amount of $500 thousand plus all accrued interest on the principal through such payment date, shall
be due by June 15, 2019
|
|
|
●
|
Third,
a minimum payment in the amount of $750 thousand plus all accrued interest on the principal through such payment date, shall
be due by July 15, 2019; and
|
|
|
●
|
Any
remaining principal and interest due at maturity.
|
We
have made partial payments towards the required monthly installments under the terms of this amendment. As has been the case with
each previous amendment, we are in continual negotiations with the holder of the Secured Supplier Note to extend the maturity
date and establish a new schedule of payments.
Note
Payable - Other
In connection with the acquisition of Bar
Code Specialties, Inc. (“BCS”), a California corporation, the Company assumed a related party note payable to the
former CTO of the RFID division of BCS. The note is payable in equal monthly installments of $5 thousand beginning October 31,
2014 and ended October 2018. The loan bears interest at 8.0% and is unsecured and subordinated to the Company’s bank debt.
On June 5, 2020, the Company reached an agreement with the noteholder to convert an aggregate of $261 thousand in principal, unpaid
interest, and penalties into an aggregate of 37,270 shares of Common Stock at a conversion price of $7.00 per share, which was
based on the closing price on June 3, 2020. The balance on this loan at December 31, 2020 and December 31, 2019 was $0 and $137
thousand, respectively, all of which was classified as long-term
NOTE
12 – OTHER LIABILITIES
At
December 31, 2020 and 2019, other liabilities consisted of the following:
|
In thousands
|
|
2020
|
|
|
2019
|
|
|
Other vendor payable
|
|
$
|
801
|
|
|
|
801
|
|
|
Dividend payable
|
|
|
253
|
|
|
|
344
|
|
|
Bonus payable
|
|
|
27
|
|
|
|
385
|
|
|
Others
|
|
|
1,477
|
|
|
|
453
|
|
|
Total other liabilities
|
|
|
2,558
|
|
|
|
1,983
|
|
|
Less Current Portion
|
|
|
(1,412
|
)
|
|
|
(1,599
|
)
|
|
Total long term other liabilities
|
|
$
|
1,146
|
|
|
$
|
384
|
|
In
prior years, we purchased key man life insurance policies for some of our executives to insure against risk of loss of an executive.
As of December 31, 2020, we had $332 thousand in accrued obligations other liabilities related to the key man insurance
policies.
NOTE
13 – COMMITMENTS AND CONTINGENCIES
Profit
Sharing Plan
We
maintain a contributory profit-sharing plan covering substantially all fulltime employees within the requirements of the
Employee Retirement Income Security Act of 1974 (“ERISA”). In 2016, the Safe Harbor element was removed from the plan
and the employer may make a discretionary matching contribution equal to a uniform percentage or dollar amount of participants’
elective deferrals for each Plan Year. In 2015, we were required to make a safe harbor non-elective contribution equal to 3 percent
of a participant’s compensation. The plan also includes a 401(k) savings plan feature that allows substantially all employees
to make voluntary contributions and provides for discretionary matching contributions determined annually by the Board of Directors.
For the years ending December 31, 2020, and 2019, the Company elected to forgo the match.
Operating
Leases
As
of December 31, 2020, we had two Operating leases as follows:
|
|
●
|
Office
space in Akron, Ohio, with monthly payments of $3 thousand and an incremental borrowing rate of 14.55%. As of December 31,
2020, we had 29 months remaining on the lease.
|
|
|
●
|
A
vehicle with monthly payments of less than $1 thousand. As of December 31, 2020, the Company had 13 months remaining on the
lease.
|
Effective January 1, 2019 we adopted Topic
842. Targeted Improvements. As of December 31, 2020 we had two operating leases for office and assembly
space and no financing leases. We elected the practical expedient ASU 2018-11, Leases (Topic 842): Targeted Improvements
which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date. Therefore, we recognized
and measured leases existing at January 1, 2019 (inception date). In addition, the Company elected the optional practical expedient
permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing
leases upon adoption. Lastly, the Company elected a short-term lease exception policy, permitting it to exclude the recognition
requirements of this standard from leases with initial terms of 12 months or less. No impact was recorded to the income statement
or beginning retained earnings for Topic 842.
Beginning
January 1, 2019, operating ROU assets and operating lease liabilities are recognized based on the present value of lease payments,
including annual rent increases, over the lease term at commencement date. Operating leases in effect prior to January 1, 2019
were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019. As none of our
leases included an implicit rate of return, we used our incremental borrowing rate based on lease term information available as
of the adoption date or lease commencement date in determining the present value of lease payments. The impact of ASU No. 2016-02
on our consolidated balance sheet beginning January 1, 2019 was through the recognition of ROU assets and lease liabilities for
operating leases. Amounts recognized at January 1 and December 31, 2019 for operating leases are as follows:
|
In thousands
|
|
January 1, 2019
|
|
|
December 31, 2019
|
|
|
ROU assets
|
|
$
|
235
|
|
|
$
|
131
|
|
|
Lease liability
|
|
$
|
235
|
|
|
$
|
134
|
|
On
January 1, 2019, we had three operating leases for office and/or warehouse space and one operating lease for a vehicle as follows:
|
|
●
|
We
were leasing approximately 7,000 sf of office space in Eugene, Oregon, with monthly payments of $4 thousand and an incremental
borrowing rate of 15.06%. This lease was terminated in December 2019.
|
|
|
●
|
We
were leasing a small office space in Akron, Ohio, with monthly payments of $3 thousand and an incremental borrowing rate of
14.55%. As of December 31, 2019, we had 41 months remaining on the lease with a lease liability of $96 thousand.
|
|
|
●
|
We
were leasing a small office and warehouse in Anaheim, California, with monthly payments of $2 thousand and an incremental
borrowing rate of 14.83%. As of December 31, 2019, we had 12 months remaining on the lease with a lease liability of $28 thousand.
|
|
|
●
|
We
were leasing a vehicle with monthly payments of less than $1 thousand and an incremental borrowing rate of 14.83%. As of December
31, 2019, the Company had 25 months remaining on the lease with a lease liability of $9 thousand.
|
Other
information related to our operating leases is as follows:
|
In thousands
|
|
|
|
|
ROU asset - January 1, 2019
|
|
$
|
235
|
|
|
Decrease
|
|
$
|
(11
|
)
|
|
Amortization
|
|
$
|
(93
|
)
|
|
ROU asset - December 31, 2019
|
|
$
|
131
|
|
|
|
|
|
|
|
|
Lease liability - January 1, 2019
|
|
$
|
235
|
|
|
Decrease
|
|
$
|
(11
|
)
|
|
Amortization
|
|
$
|
(90
|
)
|
|
Lease liability - December 31, 2019
|
|
$
|
134
|
|
|
In thousands
|
|
|
|
|
ROU asset - January 1, 2020
|
|
$
|
131
|
|
|
Decrease
|
|
$
|
-
|
|
|
Amortization
|
|
$
|
(55
|
)
|
|
ROU asset - December 31, 2020
|
|
$
|
76
|
|
|
|
|
|
|
|
|
Lease liability - January 1, 2020
|
|
$
|
134
|
|
|
Decrease
|
|
$
|
-
|
|
|
Amortization
|
|
$
|
(55
|
)
|
|
Lease liability - December 31, 2020
|
|
$
|
79
|
|
|
In thousands
|
|
December 31, 2020
|
|
|
Lease liability
|
|
|
|
|
|
Short term
|
|
$
|
31
|
|
|
Long term
|
|
$
|
48
|
|
|
Total
|
|
$
|
79
|
|
As
of December 31, 2020, our operating leases had a weighted average remaining lease term of 39.97 months and a weighted average
discount rate of 14.57%.
The
table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining
years to the lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2020:
|
In thousands
|
|
|
|
|
Year
|
|
Minimum lease payments
|
|
|
2021
|
|
$
|
41
|
|
|
2022
|
|
$
|
38
|
|
|
2023
|
|
$
|
16
|
|
|
Thereafter
|
|
$
|
-
|
|
|
Total
|
|
$
|
95
|
|
|
Less interest
|
|
$
|
(16
|
)
|
|
Present value of future minimum lease payments
|
|
$
|
79
|
|
|
Less current obligations
|
|
$
|
(31
|
)
|
|
Long term lease obligations
|
|
$
|
48
|
|
LITIGATION
Our
subsidiary, OMNIQ Vision, Inc. (f/k/a HTS (USA), Inc.), was previously in litigation with a former employee who claimed that he
was owed wages and commissions. As of March 31, 2020, the case had been resolved. While the terms of the resolution are confidential,
management has determined that the amounts involved in resolving the case are immaterial to the financial statements taken as
a whole.
The Company recently was named a defendant
in a Mississippi state lawsuit that is directly related to the RedLPR case (the “Mississippi case”). The Mississippi
case also names RedLPR, LLC as a defendant. The Mississippi case was brought by Riverland Park Technologies (“Riverland”).
Riverland is also a party to the RedLPR case. The Mississippi case was filed in the Circuit Court of Rankin County, Mississippi
on September 21, 2020.
The Company was named a defendant in
a case involving a former employee who claims he is owed approximately $60 thousand in unpaid commissions. The Company’s
position is that the former employee’s claims have no apparent factual basis and appear to be designed to force a quick
“nuisance value” settlement. This case was filed in the Superior Court of the State of California, County of San Diego
on October 21, 2020.
The
company is not a party to any other pending material legal proceeding. To the knowledge of management, no federal, state or local
governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director,
executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s
Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.
NOTE
14 – STOCKHOLDERS’ EQUITY
PREFERRED
STOCK
Series
A
As
of December 31, 2020 and 2019, there were 1,000,000 Series A preferred shares authorized and zero Series A preferred shares outstanding.
The board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 13 common shares.
Series
B
As
of December 31, 2020 and 2019, there was one (1) preferred share authorized and zero preferred shares outstanding.
Series
C
As
of December 31, 2020 and 2019, there were 5,000,000 Series C Preferred Shares (“Series C”) authorized with
2,145,030 and 4,828,530 issued and outstanding, respectively. 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 December 31, 2020 and 2019, the accrued dividends on the Series C Preferred Stock was
$253 thousand and $344 thousand, respectively.
In
June 2020, certain holders of Series C Shares elected to convert $2.7 million or 2,683,500 Series C shares and $283 thousand in
accrued dividends in exchange for 190,365 OMNIQ common stock shares.
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.
COMMON
STOCK
In
August 2020, 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, consultants, advisors and employees to the Company. Pursuant
to the Plan, one million (1,000,000) shares of the Company’s common stock, par value $0.001 (the “Shares”),
were set aside and reserved for issuance. The Plan approved by our stockholders at the September 2020, shareholders’ meeting.
For the year ending December 31, 2020, we issued 336,146 shares ( $1.6 million) to consultants and advisors for services rendered.
In
December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the years
ending December 31, 2020 and 2019, employees purchased 302 ($1 thousand) shares and 287 ($1 thousand) shares of commons stock.
For
the years ending December 31, 2020 and 2019, 216,750 and zero, respectively, in stock options and stock warrants were exercised
in exchange for 90,691 shares of OMNIQ common stock.
In
April 2020 and in conjunction with the Eyepax acquisition, we issued the former owner 80,000 share of OMNIQ common stock.
In
September 2020 and pursuant to the 2020 Equity Incentive Plan, we granted options to purchase an aggregate of 745,000 shares of
our common stock to certain of our employees, officers and directors. Included in the total shares granted are options to purchase
230,000 shares of its common stock to Mr. Shai Lustgarten, our Chief Executive Officer, options to purchase 40,000 shares of its
common stock to Mr. Neev Nissenson, our Chief Financial Officer, options to purchase 150,000 shares of its common stock to Mr.
Carlos J. Nissensohn, a consultant and principal stockholder, and options to purchase 10,000 shares of its common stock to our
Directors Andy MacMillan and Yaron Shalem, respectively. The remaining 305,000 granted options are for other employees and
consultants. The exercise price of all of the options granted was $4.40 per share, which was the closing price of the Company’s
common stock on September 29, 2020, the day prior to the grant, except for the options granted to Shai Lustgarten and Carlos J.
Nissensohn, which have an exercise price of $4.84 per share. The options granted to Shai Lustgarten and Carlos J. Nissensohn have
a term of five (5) years and the balance of the options have a term of ten (10) years.
Effective
November 11, 2019, we implemented a one-for-20 reverse stock split of the Company’s common stock. The par value of common
stock and the number of authorized shares were not adjusted as a result of the reverse stock split. All share and per share amounts
in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this
reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in
capital.
In
September 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the
right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common
stock at a conversion price of $0.236. Accordingly, we issued 317,796 shares to each of Walefar and Campbeltown.
In
September 2019, we entered into a letter agreement with Shai Lustgarten, the Company’s Chief Executive Officer, pursuant
to which we and Mr. Lustgarten agreed to extend the term of Mr. Lustgarten’s employment agreement for an additional two
(2) years. As consideration and in light of the Company’s achievements under the leadership of Mr. Lustgarten, the Company,
pursuant to its 2018 Equity Incentive Plan, issued to Mr. Lustgarten 50,000 shares of the OMNIQ common stock valued at $250 thousand.
In
September 2019, we entered into a letter agreement with Mr. Carlos J. Nissensohn and/or an entity under his control, a consultant
to the Company and principal stockholder, pursuant to which they agreed to extend the term of Mr. Nissensohn’s and/or an
entity under his control’s consulting agreement for an additional two (2) years. As consideration and in light of Mr. Nissensohn’s
and/or an entity under his control’s past consulting services which we believe were essential to its recent achievements,
we, pursuant to the 2018 Equity Incentive Plan, issued to Mr. Nissensohn and/or an entity under his control 27,500 shares of the
Company’s common stock, valued at $138 thousand.
In
April 2019, we entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited
investors (the “Purchasers”). Pursuant to the Securities Purchase Agreement, on April 9, 2019 (the “Closing
Date”), the Company sold an aggregate, with the Conversions included, of $5.0 million of units (the “Units”)
resulting in gross proceeds of $5.0 million, before deducting placement agent fees and offering expenses (the “Offering”).
The individual Unit purchase price was $6.00. Each Unit is comprised of one share of the Company’s common stock, $0.001
par value per share (the “Common Stock”), and a warrant to purchase one share of Common Stock, and, as a result of
the Offering, the Company issued 833,333 shares of Common Stock (the “Shares”) and warrants (the “Warrants”)
to purchase 833,333 shares of Common Stock (the “Warrant Shares”) at an exercise price equal to $7.00 per Warrant
Share, which Warrants are exercisable for a period of five and one-half years from the issuance date. Both Shai Lustgarten, the
Company’s Chief Executive Officer, and Carlos J. Nissensohn, a consultant to and principal stockholder of the Company, participated
in the Offering by converting $200 thousand each of unpaid principal owed to them from the HTS acquisition (the “Conversions”),
by the Company in exchange for Shares and Warrants on the same terms as all other Purchasers. With the Conversions included, the
Offering resulted in gross proceeds of $5.0 million. As a result of the Conversions, a principal amount of $150 thousand is owed
to each Walefar and Campbeltown respectively under the note issued to them as partial consideration in the sale of HTS Image Processing
to the Company on October 5, 2018.
Warrants
and Stock Options
In
connection with the April 2019 Securities Purchase Agreement previously described, we issued warrants to
purchase 891,667 shares of our common stock at an exercise price equal to $7.00 per Warrant Share, which warrants are exercisable
for a period of five and one-half years from the issuance date. The warrants were valued at $2.9 million. Also during 2019, we
issued options to purchase 128,000 valued at $564 thousand.
These
options and warrants were valued at the grant date using the Black-Scholes valuation methodology. The Company determines the assumptions
used in the valuation of warrants and option awards as of the date of grant. Differences in the expected stock price volatility,
expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company
may use different assumptions for options and warrants granted throughout the year. The valuation assumptions used to determine
the fair value of each option/warrants award on the date of grant were: expected stock price volatility 156.0% - 157.0%; expected
term in years 4.0-5.5; and risk-free interest rate 1.40% - 2.31%.
The
following table summarizes information about warrants granted during the years ended December 31,:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Number of
warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number of
warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
1,166,667
|
|
|
$
|
6.42
|
|
|
|
275,000
|
|
|
$
|
4.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
375,000
|
|
|
|
-
|
|
|
|
891,667
|
|
|
|
7.00
|
|
|
Warrants expired
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Warrants cancelled, forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Warrants exercised
|
|
|
150,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
1,366,667
|
|
|
$
|
7.19
|
|
|
|
1,166,667
|
|
|
$
|
6.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable warrants
|
|
|
1,200,001
|
|
|
$
|
7.14
|
|
|
|
1,166,667
|
|
|
$
|
6.42
|
|
Outstanding
warrants as of December 31, 2020 are as follows:
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range of
|
|
|
residual life
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
Exercise
|
|
|
span
|
|
|
Outstanding
|
|
|
Exercise
|
|
|
Exercisable
|
|
|
Exercise
|
|
|
Prices
|
|
|
(in years)
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.20
|
|
|
|
0.59
|
|
|
|
75,000
|
|
|
$
|
2.20
|
|
|
|
75,000
|
|
|
$
|
2.20
|
|
|
|
7.00
|
|
|
|
3.77
|
|
|
|
891,667
|
|
|
|
7.00
|
|
|
|
891,667
|
|
|
|
7.00
|
|
|
|
7.50
|
|
|
|
5.68
|
|
|
|
250,000
|
|
|
|
7.50
|
|
|
|
83,334
|
|
|
|
7.50
|
|
|
|
8.00
|
|
|
|
1.16
|
|
|
|
10,000
|
|
|
|
8.00
|
|
|
|
10,000
|
|
|
|
8.00
|
|
|
|
10.00
|
|
|
|
2.22
|
|
|
|
125,000
|
|
|
|
10.00
|
|
|
|
125,000
|
|
|
|
10.00
|
|
|
|
14.00
|
|
|
|
0.16
|
|
|
|
15,000
|
|
|
|
14.00
|
|
|
|
15,000
|
|
|
|
14.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.20 to 14.00
|
|
|
|
3.93
|
|
|
|
1,366,667
|
|
|
$
|
8.12
|
|
|
|
1,200,001
|
|
|
$
|
8.12
|
|
Warrants
outstanding have the following expiry date and exercise prices as of the year ended December 31, 2020:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Expiry Date
|
|
Prices
|
|
|
2020
|
|
|
2019
|
|
|
June 26, 2020
|
|
$
|
5.60
|
|
|
|
-
|
|
|
|
10,000
|
|
|
October 10, 2020
|
|
|
12.00
|
|
|
|
-
|
|
|
|
15,000
|
|
|
December 30, 2020
|
|
|
4.00
|
|
|
|
-
|
|
|
|
150,000
|
|
|
February 02, 2021
|
|
|
14.00
|
|
|
|
15,000
|
|
|
|
-
|
|
|
August 02, 2021
|
|
|
2.20
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
October 10, 2021
|
|
|
10.00
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
February 27, 2022
|
|
|
8.00
|
|
|
|
10,000
|
|
|
|
-
|
|
|
May 18, 2023
|
|
|
10.00
|
|
|
|
50,000
|
|
|
|
-
|
|
|
October 14, 2023
|
|
|
10.00
|
|
|
|
50,000
|
|
|
|
-
|
|
|
October 06, 2024
|
|
|
7.00
|
|
|
|
891,667
|
|
|
|
891,667
|
|
|
September 01, 2025
|
|
|
7.50
|
|
|
|
83,334
|
|
|
|
-
|
|
|
June 04, 2026
|
|
|
7.50
|
|
|
|
83,333
|
|
|
|
-
|
|
|
December 04, 2027
|
|
|
7.50
|
|
|
|
83,333
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8.37
|
|
|
|
1,366,667
|
|
|
|
1,166,667
|
|
We
have a stock option plan whereby the Board of Directors, may grant to directors, officers, employees, or consultants of the Company
options to acquire common shares. The Board of Directors of the Company has the authority to determine the terms, limits, restrictions
and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The plan was adopted by
the Company’s Board of Directors on November 17, 2014 in order to provide an inducement and serve as a long-term
incentive program. The maximum number of common shares that may be reserved for issuance was set at 500,000.
The
option exercise price is established by the Board of Directors and may not be lower than the market price of the common shares
at the time of grant. The options may be exercised during the option period determined by the Board of Directors, which may vary,
but will not exceed ten years from the date of the grant. There are 500,000 of the Company’s common shares which may be
issued pursuant to the exercise of share options granted under the Plan..
Stock
Options - The following table summarizes information about stock options granted during the years ended December 31, 2020
and 2019:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Number of
stock
options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number of
stock
options
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
1,133,550
|
|
|
$
|
4.00
|
|
|
|
1,006,050
|
|
|
$
|
3.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted
|
|
|
775,000
|
|
|
|
-
|
|
|
|
127,500
|
|
|
|
5.00
|
|
|
Stock options expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock options cancelled, forfeited
|
|
|
30,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock options exercised
|
|
|
66,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
1,811,550
|
|
|
|
4.32
|
|
|
|
1,133,550
|
|
|
|
4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable stock options
|
|
|
999,988
|
|
|
$
|
4.05
|
|
|
|
952,425
|
|
|
$
|
3.94
|
|
Outstanding
stock options as of December 31, 2020, are as follows:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Range of
|
|
|
residual life
|
|
|
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
Exercise
|
|
|
span
|
|
|
Outstanding
|
|
|
Exercise
|
|
|
Exercisable
|
|
|
Average
|
|
|
Prices
|
|
|
(in years)
|
|
|
Stock Options
|
|
|
Price
|
|
|
Stock Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.70
|
|
|
|
1.13
|
|
|
|
114,050
|
|
|
$
|
1.70
|
|
|
|
114,050
|
|
|
$
|
1.70
|
|
|
|
2.20
|
|
|
|
0.59
|
|
|
|
175,000
|
|
|
|
2.20
|
|
|
|
175,000
|
|
|
|
2.20
|
|
|
|
2.40
|
|
|
|
2.18
|
|
|
|
272,000
|
|
|
|
2.40
|
|
|
|
272,000
|
|
|
|
2.40
|
|
|
|
4.20
|
|
|
|
4.30
|
|
|
|
10,000
|
|
|
|
4.20
|
|
|
|
5,000
|
|
|
|
4.20
|
|
|
|
4.40
|
|
|
|
8.39
|
|
|
|
454,250
|
|
|
|
4.40
|
|
|
|
88,000
|
|
|
|
4.40
|
|
|
|
4.84
|
|
|
|
9.75
|
|
|
|
380,000
|
|
|
|
4.84
|
|
|
|
-
|
|
|
|
4.84
|
|
|
|
5.00
|
|
|
|
2.52
|
|
|
|
147,500
|
|
|
|
5.00
|
|
|
|
87,188
|
|
|
|
5.00
|
|
|
|
5.40
|
|
|
|
2.92
|
|
|
|
133,750
|
|
|
|
5.40
|
|
|
|
133,750
|
|
|
|
5.40
|
|
|
|
10.00
|
|
|
|
3.89
|
|
|
|
125,000
|
|
|
|
10.00
|
|
|
|
125,000
|
|
|
|
10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7
to 10
|
|
|
|
5.32
|
|
|
|
1,811,550
|
|
|
$
|
4.05
|
|
|
|
999,988
|
|
|
$
|
5.32
|
|
Stock
options outstanding at the end of the year have the following expiry date and exercise prices:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Expiry Date
|
|
Prices
|
|
|
31-Dec-20
|
|
|
31-Dec-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 02, 2021
|
|
$
|
2.20
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
February 17, 2022
|
|
|
1.50
|
|
|
|
38,017
|
|
|
|
38,017
|
|
|
February 17, 2022
|
|
|
1.80
|
|
|
|
76,033
|
|
|
|
76,033
|
|
|
February 28, 2023
|
|
|
5.00
|
|
|
|
20,000
|
|
|
|
-
|
|
|
March 05, 2023
|
|
|
2.40
|
|
|
|
272,000
|
|
|
|
340,000
|
|
|
July 31, 2023
|
|
|
5.00
|
|
|
|
127,500
|
|
|
|
127,500
|
|
|
October 31, 2023
|
|
|
4.40
|
|
|
|
89,250
|
|
|
|
108,250
|
|
|
November 30, 2023
|
|
|
5.40
|
|
|
|
133,750
|
|
|
|
143,750
|
|
|
November 20, 2024
|
|
|
10.00
|
|
|
|
125,000
|
|
|
|
125,000
|
|
|
April 20, 2025
|
|
|
4.20
|
|
|
|
10,000
|
|
|
|
-
|
|
|
September 30, 2030
|
|
|
4.40
|
|
|
|
365,000
|
|
|
|
-
|
|
|
September 30, 2030
|
|
|
4.84
|
|
|
|
380,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4.26
|
|
|
|
1,811,550
|
|
|
|
1,133,550
|
|
We
recorded stock compensation expense relating to the vesting of stock options and warrants as follows for the years ended December
31, 2020 and 2019;
|
|
|
2020
|
|
|
2019
|
|
|
In thousands
|
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
$
|
-
|
|
|
$
|
388
|
|
|
Stock Option vesting
|
|
|
709
|
|
|
|
879
|
|
|
Total
|
|
$
|
709
|
|
|
$
|
1,267
|
|
NOTE
15 – RELATED PARTY TRANSACTIONS
In
February 2020 we amended the consulting agreement with Mr. Carlos J. Nissensohn, a principal shareholder of the Company and a
family member of a Director of the Company. The terms and condition of the contract are as follows:
|
|
●
|
48-month
term with 90 day termination notice by the Company
|
|
|
|
|
|
|
●
|
A
monthly fee of $30 thousand.
|
|
|
|
|
|
|
●
|
If
we procure debt financing during the term of Mr. Nissensohn’s agreement, without any equity component, Mr. Nissensohn
shall be entitled to 3% of the gross funds raised, however if we are required to pay a success fee to another external entity,
then Mr. Nissensohn shall be entitled to only 2% of the gross funds raised.
|
|
|
|
|
|
|
●
|
In
addition to the above, in the event of an equity financing resulting in gross proceeds of at least $3 million to us within
24 months of the date the contract, Mr. Nissensohn shall further be entitled to certain warrants to be granted by us which
upon their exercise pursuant to their terms, Mr. Nissensohn shall be entitled to receive OMNIQ shares which represent 3% of
the OMNIQ issued share capital immediately prior to the consummation of such investment. The warrants will carry an exercise
price per warrant/share representing 100% of the closing price per share as closed in the equity financing. This section and
the issue of the warrant by OMNIQ are subject to the approval of the Board of Directors of OMNIQ. However, if the Board does
not approve the issuance of warrants; then Mr. Nissensohn will be entitled to a fee with the equivalent value based on a Black
Scholes valuation
|
|
|
|
|
|
|
●
|
In
addition to the above, Mr. Nissensohn will be entitled to a $80 thousand one-time payment which shall be paid on the
1st day that the OMNIQ shares become traded on the NASDAQ or NYSE Stock Market within 24 months of the date of
the contract
|
|
|
|
|
|
|
●
|
In
addition to the aforementioned, in the event that we close any M&A transaction with a third party target, Mr. Nissensohn
shall be entitled to a success fee in the amount equal to 5% of the total transaction price, in any combination of
cash and shares that will be determined by OMNIQ
|
Additional
related party transactions are discussed in Notes 10.
NOTE
16 – INCOME TAX
For
the year ended December 31, 2020, the Company has $5 thousand of current income tax provision (US State & Local and
Foreign) and no deferred income tax provision.
The
tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows as of December
31,
|
In thousands
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
2020
|
|
|
2019
|
|
|
Reserves and deferred revenue
|
|
$
|
258
|
|
|
$
|
238
|
|
|
163(J) Limitation
|
|
|
1,446
|
|
|
|
664
|
|
|
Stock options
|
|
|
-
|
|
|
|
-
|
|
|
Net operating loss
|
|
|
7,240
|
|
|
|
5,319
|
|
|
Total gross deferred tax assets
|
|
|
8,944
|
|
|
|
6,221
|
|
|
Less: Valuation Allowance
|
|
|
(8,325
|
)
|
|
|
(5,414
|
)
|
|
Net deferred tax assets
|
|
|
619
|
|
|
|
807
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets and depreciation
|
|
|
(619
|
)
|
|
|
(807
|
)
|
|
Total deferred tax liabilities
|
|
|
(619
|
)
|
|
|
(807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Components
of net deferred tax assets, including a valuation allowance, are as follows as of December 31:
|
|
|
2020
|
|
|
2019
|
|
|
Deferred tax assets
|
|
$
|
8,325
|
|
|
$
|
5,414
|
|
|
Valuation allowance
|
|
|
(8,325
|
)
|
|
|
(5,414
|
)
|
|
Total deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
valuation allowance for deferred tax assets as of December 31, 2020 and 2019 was $8.3 million and $5.4 million, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible.
Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Management has recorded a 100% Valuation Allowance, against its Net Deferred Tax Assets,
since Management believes it is more likely than not that it will not be realized at the date of this statement. The Company will
continue to monitor the potential utilization of this asset. Should factors and evidence change to aid in this assessment, a potential
adjustment to the valuation allowance in future periods may occur. The Company records any penalties and interest as a component
of operating expenses.
The
reconciliation between statutory rate and effective rate is as follows as of December 31, 2020 and 2019:
|
|
|
2020
|
|
|
2019
|
|
|
Federal statutory tax rate
|
|
|
21
|
%
|
|
|
21.0
|
%
|
|
State taxes
|
|
|
4.42
|
%
|
|
|
1.41
|
%
|
|
Foreign income taxes
|
|
|
-
|
%
|
|
|
-
|
%
|
|
Nondeductible items
|
|
|
(1.89
|
)%
|
|
|
(11.52
|
)%
|
|
Acquisition accounting adjustments
|
|
|
-
|
%
|
|
|
-
|
%
|
|
Change in valuation allowance
|
|
|
(29.71
|
)%
|
|
|
13.48
|
%
|
|
Return to provision adjustments
|
|
|
1.66
|
%
|
|
|
(25.33
|
)%
|
|
Rate Change
|
|
|
4.03
|
%
|
|
|
-
|
%
|
|
Other
|
|
|
.44
|
%
|
|
|
0.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(.06
|
)%
|
|
|
(0.40
|
)%
|
The
Company reported no uncertain tax liability as of December 31, 2020 and expects no significant change to the uncertain
tax liability over the next twelve months. The Company’s 2014, 2015, 2016, 2017, and 2018 federal and state income tax returns
are open for examination by the applicable governmental authorities.
As
of December 31, 2019, the Company had a net operating loss (NOL) carryforward of approximately $22.1 million. The NOL carryforward
begins to expire in 2024. Under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC Section 382”),
a corporation that undergoes an “ownership change” is subject to limitations on its use of pre-change NOL carryforwards
to offset future taxable income. Within the meaning of IRC Section 382, an “ownership change” occurs when the aggregate
stock ownership of certain stockholders (generally 5% shareholders, applying certain look-through rules and aggregation rules
which combine unrelated shareholders that do not individually own 5% or more of the corporation’s stock into one or more
“public groups” that may be treated as 5-percent shareholder) increases by more than 50 percentage points over such
stockholders’ lowest percentage ownership during the testing period (generally three years). In general, the annual use
limitation equals the aggregate value of common stock at the time of the ownership change multiplied by a specified tax-exempt
interest rate. The Company has not completed a study as to whether there is a 382 limitation on its NOLs that will limit or possibly
eliminate the use of its NOLs in the future. Company’s Management has recorded a 100% valuation allowance on the entire
NOL as it believes that it is more likely than not that the deferred tax asset associated with the NOLs will not be realized regardless
of whether or not an “ownership change” has occurred.
NOTE
17 – SUBSEQUENT EVENTS
In
accordance with ASC 855, “Subsequent Events”, the Company has evaluated all subsequent events through the date of
this filing. No other significant events have occurred besides the events disclosed in the Notes to the Financial Statements.
EXHIBIT
INDEX—we will update the exhibit index
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Exhibit
No.
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Description
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(a)
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Exhibits.
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3.1
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Form of Certificate of Amendment to the Certificate of Incorporation, as amended, dated November 18, 2019 incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 18, 2019.
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3.2
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Amendment to Certificate of Designation of Series C Preferred Stock on June 17, 2016, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2016.
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3.3
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Form of Certificate of Amendment to the Certificate of Incorporation, as amended, of OMNIQ Corp., dated September 30, 2020, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 2, 2020.
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4.1
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$12,492,136.51 Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.
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4.2*
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Description
of Securities
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4.3
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$483,173.60 CAD Secured Promissory Note, from Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and their subsidiaries and/or affiliates, jointly and severally, to ScanSource, Inc., incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.
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4.4
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Form of Warrant, incorporated by referenced to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2019.
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4.5
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Form of Placement Agent Warrant, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on April 9, 2019.
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10.1
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Factoring and Security Agreement, by and among Quest Solution, Inc., Quest Marketing, Inc., Bar Code Specialties, Inc., and Action Capital Corporation, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016.
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10.2
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Pledge and Security Agreement, by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and ScanSource, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016.
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10.3
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Security Agreement, by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and ScanSource, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on July 8, 2016.
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10.4
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Warrant issued to David and Kathy Marin dated February 28, 2018, incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed with the SEC on March 1, 2018.
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10.5
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Movable Hypothec and General Security Agreement by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and ScanSource, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.
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10.6
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Universal Movable Hypothec and General Security Agreement by and among Quest Solution, Inc., Bar Code Specialties, Inc., Quest Marketing, Inc., Quest Solution Canada Inc., Quest Exchange Ltd. and ScanSource, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 22, 2016.
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10.7
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Separation Agreement and General Release by and between Quest Solution, Inc. and Jason Griffith, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 26, 2016.
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10.8
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Separation Agreement and General Release by and between Quest Solution, Inc. and Scot Ross, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 4, 2016.
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10.9
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Redemption Agreement by and among Quest Solution, Inc., Danis Kurdi and 3587967 Canada, Inc. dated November 30, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 6, 2016.
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10.10
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Exchange and Transfer Agreement, by and among Viascan Group. Inc., Quest Solution, Inc. and Quest Exchange Ltd. dated November 30, 2016, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 6, 2016.
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10.11
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Employment Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.
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10.12
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Modification Agreement by and between the Company and Shai Lustgarten dated February 17, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2017.
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10.13
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Resignation Agreement by and between the Company and Tom Miller dated July 7, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 12, 2017.
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10.14
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Consulting
Agreement by and between the Company and Carlos J Nissensohn dated August 2, 2017 incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 4, 2017.
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10.15
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Consulting Agreement by and between the Company and YES-IF dated September 8, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2017.
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10.16
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Termination Agreement by and between the Company and Joey Trombino dated September 29, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2017.
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10.17
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Employment Agreement by and between the Company and Benjamin Kemper dated October 2, 2017, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2017.
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10.18
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Settlement Agreement dated February 28, 2018 by and between the Company and David and Kathy Marin (the “Marin Settlement Agreement I”), incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.19
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Settlement Agreement dated February 28, 2018 by and between the Company and Kurt Thomet, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.20
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Settlement Agreement dated February 28, 2018 by and between the Company and George Zicman., incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.21
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Voting Agreement dated February 28, 2018 by and between the Company and David and Kathy Marin, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.22
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Voting Agreement dated February 28, 2018 by and between the Company and Kurt Thomet, incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.23
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Voting Agreement dated February 28, 2018 by and between the Company and George Zicman, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on March 1, 2018.
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10.24
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Employment Agreement by and between the Company and David Marin dated February 28, 2018. 2018 Equity Incentive Plan incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on March 12, 2018.
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10.25
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Settlement Agreement with Jason Griffith, dated June 7, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2018.
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10.26
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Amendment to Security Agreement with ScanSource, Inc. dated September 7, 2018, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.
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10.27
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Amendment to Pledge and Security Agreement with ScanSource, Inc. dated September 7, 2018, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.
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10.28
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Prepayment Agreement with ScanSource, Inc. dated September 7, 2018, incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.
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10.29
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Amendment #9 to Trade Credit Extension Letter with ScanSource, Inc. dated September 7, 2018, incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.
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10.30
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Amendment #6 to Secured Promissory Note with ScanSource, Inc. dated September 7, 2018 (the “Modified Note”), incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2018.
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10.31
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HTS Purchase Agreement, dated October 5, 2018, by and between the Company, Walefar Investments, Ltd. and Campbeltown Consulting, Ltd. incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2018.
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10.32
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Convertible Promissory Note issued to Walefar Investments, Ltd. and Campbeltown Consulting, Ltd., incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2018.
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10.33
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Form of Securities Purchase Agreement, dated April 4, 2019, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 9, 2019.
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10.34
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Letter Agreement with Shai Lustgarten, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.
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10.35
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Letter Agreement with Carlos J. Nissensohn, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.
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10.36
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Neev Nissenson Employment Agreement, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2019.
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10.37
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Asset Purchase Agreement, dated February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.
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10.38
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Shai Lustgarten Employment Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.
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10.39
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Consulting Agreement, dated as of February 27, 2020, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.
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10.40
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Asset Purchase Agreement on February 28, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 4, 2020.
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*
Filed herewith.
ITEM
16. NONE.