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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2023

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from________ to__________

 

Commission File Number: 001-40768

 

OMNIQ Corp.

(Exact name of registrant as specified in its charter)

 

Delaware   20-3454263

(State or other jurisdiction

of incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

1865 West 2100 South

Salt Lake City, UT 84119

(Address of principal executive offices) (Zip Code)

 

(801) 244-9577

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value   OMQS   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
       
Non-accelerated filer ☐ Smaller reporting company ☒
(Do not check if a smaller reporting company)      
       
Emerging growth company ☐    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 10,669,489 shares of common stock, $0.001 par value, as of October 24, 2023.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION F-1
ITEM 1. FINANCIAL STATEMENTS F-1
CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2023 AND DECEMBER 31, 2022 F-1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 F-2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND DECEMBER 31, 2022 F-3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 F-4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-5
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 7
ITEM 4. CONTROLS AND PROCEDURES 7
PART II - OTHER INFORMATION 7
ITEM 1. LEGAL PROCEEDINGS. 7
ITEM 1A. RISK FACTORS. 7
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 7
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 8
ITEM 4. MINE SAFETY DISCLOSURES. 8
ITEM 5. OTHER INFORMATION. 8
ITEM 6. EXHIBITS. 9
SIGNATURES 10

 

2
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

OMNIQ CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share and per share data) 

September 30,

2023

  

December 31,

2022

 
  As of 
(In thousands, except share and per share data) 

September 30,

2023

  

December 31,

2022

 
   (UNAUDITED)     
ASSETS          
Current assets          
Cash and cash equivalents  $408   $1,311 
Accounts receivable, net   18,472    23,893 
Inventory   6,044    8,726 
Prepaid expenses   787    1,268 
Other current assets   33    473 
Total current assets   25,744    35,671 
           
Property and equipment, net of accumulated depreciation of $1,084 and $1,030 respectively   1,263    1,086 
Goodwill   16,363    16,542 
Trade name, net of accumulated amortization of $4,768 and $4,458, respectively   1,364    1,826 
Customer relationships, net of accumulated amortization of $11,161 and $10,762, respectively   3,898    4,967 
Other intangibles, net of accumulated amortization of $1,569 and $1,541, respectively   532    675 
Right of use lease asset   2,490    2,300 
Other assets   1,399    1,744 
Total Assets   53,053    64,811 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued liabilities  $53,406   $54,736 
Line of credit   2,660    1,971 
Accrued payroll and sales tax   1,653    2,633 
Notes payable, related parties – current portion   -    293 
Notes payable – current portion   8,828    11,572 
Lease liability – current portion   1,007    942 
Other current liabilities   1,390    1,394 
Total current liabilities   68,944    73,541 
           
Long term liabilities          
Notes payable, related party, less current portion   -    - 
Accrued interest and accrued liabilities, related party   73    72 
Notes payable, less current portion   1,427    55 
Lease liability   1,519    1,404 
Other long term liabilities   282    265 
Total liabilities   72,245    75,337 
           
Stockholders’ equity (deficit)          
Series A Preferred stock; $0.001 par value; 2,000,000 shares designated, 0 shares issued and outstanding   -    - 
Series B Preferred stock; $0.001 par value; 1 share designated, 0 shares issued and outstanding   -    - 
Series C Preferred stock; $0.001 par value; 3,000,000 shares designated, 502,000 shares issued and 544,500 outstanding, respectively   1    1 
Common stock; $0.001 par value; 15,000,000 shares authorized; 7,893,067 and 7,714,780 shares issued and outstanding, respectively.   8    8 
Additional paid-in capital   75,523    73,714 
Accumulated (deficit)   (96,162)   (84,460)
Cumulative Translation Adjustment   1,438    211 
Total OmniQ stockholders’ equity (deficit)   (19,192)   (10,526)
           
Total liabilities and equity (deficit)  $53,053   $64,811 

 

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

 

F-1
 

 

OMNIQ CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

(In thousands, except share and per share data)  2023   2022   2023   2022 
   For the three months ending   For the Nine months ended 
   September 30,   September 30, 
(In thousands, except share and per share data)  2023   2022   2023   2022 
Revenues                    
Total Revenues  $17,480   $27,008   $65,748   $77,539 
                     
Cost of goods sold                    
Cost of goods sold   13,471    21,032    52,131    59,449 
                     
Gross profit   4,009    5,976    13,617    18,090 
                     
Operating expenses                    
Research & Development   482    445    1,464    1,436 
Selling, general and administrative   5,585    7,624    17,667    21,173 
Depreciation   146    91    349    241 
Amortization   418    474    1,276    1,326 
Total operating expenses   6,631    8,634    20,756    24,176 
                     
Loss from operations   (2,622)   (2,658)   (7,139)   (6,086)
                     
Other income (expenses):                    
Interest expense   (898)   (880)   (2,575)   (2,569)
Other (expenses) income   (1,000)   (217)   (2,473)   (870)
Total other expenses   (1,898)   (1,097)   (5,048)   (3,439)
Net Loss Before Income Taxes   (4,520)   (3,755)   (12,187)   (9,525)
Provision for Income Taxes                    
Current   215    (55)   509    (41)
Total Provision for Income Taxes   215    (55)   509    (41)
                     
Net Loss  $(4,305)  $(3,810)  $(11,678)  $(9,566)
Net income attributable to noncontrolling interest   -    -    -    67 
Net Loss attributable to OmniQ Corp  $(4,305)  $(3,810)  $(11,678)  $(9,633)
                     
Net Loss  $(4,305)  $(3,810)  $(11,678)  $(9,566)
Foreign currency translation adjustment   510    241    1,227    260 
Comprehensive loss   (3,795)   (3,569)   (10,451)   (9,306)
Reconciliation of net loss to net loss attributable to common shareholders                    
Net loss   (4,305)   (3,810)   (11,678)   (9,566)
Less: Dividends attributable to non-common stockholders’ of OmniQ Corp   (8)   (149)   (24)   (197)
Net income attributable to noncontrolling interest   -    -    -    - 
Net loss attributable to common stockholders’ of OmniQ Corp   (4,313)   (3,959)   (11,702)   (9,763)
Net (loss) per share - basic attributable to common stockerholders’ of OmniQ Corp  $(0.55)  $(0.52)  $(1.50)  $(1.29)
                     
Weighted average number of common shares outstanding – basic   7,891,444    7,578,351    7,788,262    7,545,190 

 

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

 

F-2
 

 

OMNIQ CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

 

                                     
   Series C       Additional       Non   Other  

Total

Stockholders’

 
   Preferred Stock   Common Stock   Paid-in   Accumulated   Controlling   Comprehensive   Equity 
(In thousands)  Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Income (Loss)   (Deficit) 
                                     
Balance, December 31, 2021   544   $         1    7,459           20    70,606    (70,571)   2,396    (154)                2,298 
Dividend on Class C Shares   -    -    -    -    -    (48)   -    -    (48)
ESPP Stock Issuance   -    -    2    -    8    -    -    -    8 
Stock and Warrant issued for services   -    -    -    -    298    -    -    -    298 
Stock-based compensation – options, warrants, issuances   -    -    -    -    460    -    -    -    460 
Exercise of stock options and warrants   -    -    99    -    41    -    -    -    41 
Cumulative Translation Adjustment   -    -    -    -    -    -    (20)   (10)   (30)
Net (loss) income   -    -    -    -    -    (2,636)   67    -    (2,569)
Balance, March 31, 2022   544   $1    7,560   $20   $71,413   $(73,255)  $2,443   $(164)  $458 
Dividends   -    -    -    -    -    (141)   -    -    (141)
ESPP Stock Issuance   -    -    1    -    10    -    -    -    10 
Noncontrolling interests - distributions and other   -    -    -    -    (668)   -    (2,443)   -    (3,111)
Exercise of stock options and warrants   -    -    18    -    87    -    -    -    87 
Stock-based compensation – options, warrants, issuances   -    -    -    -    743    -    -    -    743 
Cumulative Translation Adjustment   -    -    -    -    -    -         241    241 
Net (loss) income   -    -    -    -    -    (3,186)   -    -    (3,186)
Balance, June 30, 2022   544   $1    7,579   $20   $71,585   $(76,582)  $-  $77   $(4,899)
                                              
Dividends   -    -    -    -    -    (8)   -    -    (8)
ESPP Stock Issuance   -    -    2    -    8    -    -    -    8 
Other   -    -    -    (12)   13    (1)   -    -    - 
Exercise of stock options and warrants   -    -    11    -    19    -    -    -    19 
Stock-based compensation – options, warrants, issuances   -    -    -    -    834    -    -    -    834 
Stock and warrant issued for services   -    -    20    -    109    -    -    -    109 
Cumulative Translation Adjustment   -    -    -    -    -    -         183    183 
Net (loss) income   -    -    -    -    -    (3,810)   -    -    (3,810)
Balance, September 30, 2022   544   $1    7,612   $8  $72,568   $(80,401)  $-  $260   $(7,564)
                                              
Balance, December 31, 2022   544   $1    7,714   $8   $73,714   $(84,460)  -   $211  $(10,526)
Dividend on Class C Shares   -    -    -    -    -    (8)   -    -    (8)
ESPP Stock Issuance   -    -    2    -    10    -    -    -    10 
Stock and Warrant issued for services   -    -    10    -    45    -    -    -    45 
Stock-based compensation – options, warrants, issuances   -    -    -    -    516    -    -    -    516 
Exercise of stock options and warrants   -    -    156    -    173    -    -    -    173 
Conversion of shares   (42)   -    2    -    -    -    -    -    - 
Cumulative Translation Adjustment   -    -    -    -    -    -    -    457    457 
Net (loss) income   -    -    -    -    -    (3,507)   -    -    (3,507)
Balance, March 31, 2023   502   $1    7,884   $8   $74,458   $(87,975)  $-   $668   $(12,840)
Dividend on Class C Shares   -    -    -    -    -    (8)   -    -    (8)
ESPP Stock Issuance   -    -    2    -    8    -    -    -    8 
Exercise of stock options and warrants   -    -    4    -    18    -    -    -    18 
Stock-based compensation – options, warrants, issuances   -    -    -    -    516    -    -    -    516 
Cumulative Translation Adjustment   -    -    -    -    -    -    -    260    260 
Net (loss) income   -    -    -    -    -    (3,866)   -    -    (3,866)
Balance, June 30, 2023   502   $1    7,890   $8   $75,000   $(91,849)  $-   $928   $(15,912)
Dividend on Class C Shares   -    -    -    -    -    (8)   -    -    (8)
ESPP Stock Issuance   -    -    3    -    7    -    -    -    7 
Stock-based compensation – options, warrants, issuances   -    -    -    -    516    -    -    -    516 
Cumulative Translation Adjustment   -    -    -    -    -    -    -    510    510 
Net (loss) income   -    -    -    -    -    (4,305)   -    -    (4,305)
Balance, September 30, 2023   502   $1    7,893   $8   $75,523   $(96,162)  $-   $1,438   $(19,192)

 

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

 

F-3
 

 

OMNIQ CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

For the nine months ended September 30,

 

(In thousands)  2023   2022 
Cash flows from operations          
Net loss  $(11,678)  $(9,566)
Adjustments to reconcile net loss to net cash provided by operating activities:          
Loss on disposal of PP&E   -    46 
Stock-based compensation   1,548    2,817 
Stock and warrant issued for services   45    - 
Depreciation and amortization   1,625    1,567 
Amortization of ROU asset   838    695 
Changes in operating assets and liabilities:          
Accounts receivable   4,097    (1,311)
Prepaid expenses   446    (502)
Inventory   2,158    (1,847)
Other assets   537    168 
Accounts payable and accrued liabilities   (469)   6,951 
Accrued interest and accrued liabilities, related party   1    7 
Accrued payroll and sales taxes payable   (882)   404 
Lease liability   (847)   (693)
Deferred tax assets, net   4    (107)
Other liabilities   (74)   (630)
Net cash provided by (used in) operating activities   (2,651)   (2,001)
           
Cash flows from investing activities          
Payment for additional ownership in subsidiary   -    (3,518)
Purchase of property and equipment   457    (230)
Proceeds from sale of other assets   141    (175)
Net cash provided by (used in) investing activities   598    (3,923)
           
Cash flows from financing activities          
Proceeds from ESPP stock issuance   25    27 
Proceeds from exercise of options and warrants   191    147 
Dividends paid to non-controlling interest   -    (1,448)
Payments on notes/loans payable   (1,082)   (3,092)
Proceeds from the issuance of notes/loans payable   393    4,822 
Proceeds from draw on line of credit   796    1,879 
Net cash (used in) provided by financing activities   323    2,335 
           
Net change in cash and cash equivalents   (1,730)   (3,589)
           
Effect of foreign exchange rates on cash and cash equivalents   827    295 
    -      
Cash and cash equivalents at beginning of period   1,311    7,085 
           
Cash and cash equivalents at end of period  $408   $3,791 
           
Non-cash activities:          
Stock issued for services  $-   $298 
Declared dividends payable  $24   $24 
Right of use asset acquired in exchange for lease liability  $120   $- 
Supplemental disclosure of cash flow information:          
Cash paid for interest  $2,592   $2,569 
Cash paid for income taxes  $-   $66 

 

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

 

F-4
 

 

OMNIQ CORP.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The condensed consolidated financial statements include the accounts of OMNIQ Corp, and its wholly owned subsidiaries, referred to herein as “we,” “us,” “OMNIQ,” or the “Company”. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

 

We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. During nine-month period ended September 30, 2023, there were no significant changes to those accounting policies.

 

Net Loss Per Common Share

 

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine-months ended September 30, 2023, and 2022 were 7,788,262 and 7,545,190, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

 

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported as of:

 

  

September 30,

2023

  

September 30,

2022

 
Options to purchase common stock   1,601,657    2,173,583 
Warrants to purchase common stock   1,431,734    1,481,734 
Potential shares excluded from diluted net loss per share   3,033,391    3,655,317 

 

Contract Balances

 

We recognize revenue once the product has been shipped. For some transactions we collect a deposit on the transaction. These deposits represent cash received under noncancelable contracts before the related product or service is transferred to the customer. We record this as a customer deposit, which is included in accounts payable and other accrued expenses on our consolidated balance sheet. Such amounts are recognized as revenue by the Company upon shipment of the product or performance of the services when the revenue recognition criteria is met and generally within one year.

 

The balances of customer deposits included in accounts payable and other accrued expenses as of September 30, 2023, and December 31, 2022 were approximately $573 thousand and $1 million, respectively. The amount of revenue recognized in the nine-months ended September 30, 2023, that related to the customer deposits as of December 31, 2022 was $1.2 million.

 

F-5
 

 

NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES

 

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. The following are the principal conditions or events which potentially raise substantial doubt about the company’s ability to continue as a going concern:

 

  ● Balancing the need for operational cash with the need to add additional products
  ● Timely and cost-effective development of products
  ● Working capital deficit of $43 million as of September 30, 2023
  ● Accumulated deficit of $96 million as of September 30, 2023
  ● Multiple periods of losses from operations
  ● Noncompliance with certain debt covenants

 

These facts and others have raised concerns 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, which we have successfully accomplished to date.

 

The following conditions, plans and actions are currently being implemented to address the Company’s conditions:

 

● Outstanding warrants exist from prior offerings that could be exercised for cash depending upon the performance of our stock.
● The Company’s acquisition of Dangot Computers, Ltd. has improved the balance sheet, profitability, and cash flow and is expected to help the Company as a whole to generate positive cash flows from operations for the foreseeable future.
● The acquisition of Dangot has added capabilities to the Company which have already transformed into significant new orders in the Parking segment. Management expects the collaboration and cross sales to contribute to improved revenues and margins.
● Management is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations.
● Blue Star - The Company’s total accounts payable due to Blue Star as of September 30, 2023, was approximately $39 million. Blue Star is an unsecured creditor, financing a substantial amount the Company’s supply chain demand. Management believes that Blue Star will continue supplying the Company with preferable credit terms. Blue Star has agreed to the annual interest rate of 5% on invoices that are past due. As an unsecured creditor of the Company, Blue Star has no incentive to force a liquidation. The Company has enjoyed a good mutual relationship for the past four years.
● Management is in the process of finalizing a new line of credit with an additional financial institution.
● In October 2023 management finalized an equity raise which resulted in $2.5 million in net cash received from investors. See note 12.

 

NOTE 3 – CONCENTRATIONS

 

For the nine-months ended September 30, 2023 and the year ended December 31, 2022, no customers accounted for more than 10% and two customers accounted for 30%, respectively, of the Company’s consolidated revenues.

 

Accounts receivable at September 30, 2023 and December 31, 2022 are made up of trade receivables due from customers in the ordinary course of business. No customer accounted for more than 10% of the outstanding receivables as of September 30, 2023, or December 31, 2022.

 

For the nine months ended September 30, 2023 and the year ended December 31, 2022 one vendor made up 29% and 65%, respectively, of our purchases.

 

F-6
 

 

NOTE 4 – BUSINESS ACQUISITION

 

Dangot Computers Ltd

 

On April 1, 2022, the Company closed on its acquisition of Dangot and exercised the remaining portion of its option to purchase 23.0% of the capital stock, thereby making Dangot a fully owned subsidiary of the Company. The Company paid $3,518,000 to purchase the additional shares. The Company utilized its working capital and a combination of short- and long-term loans.

 

NOTE 5 – INVENTORY

 

Inventory consisted of the following as of:

 

In thousands  September 30, 2023   December 31, 2022 
         
Raw materials  $671   $649 
Inventory in transit   455    2,004 
Finished goods (less allowance)   4,918    6,073 
Total inventories  $6,044   $8,726 

 

NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT

 

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

 

On March 25, 2022, we entered into a Business Finance Agreement (the “BFA”) with BridgeBank a division of Western Alliance Bank (“BridgeBank”) to establish the sale of accounts receivable credit facility, whereby we may obtain short-term financing by selling and assigning acceptable accounts receivables to BridgeBank. Pursuant to the BFA, the outstanding principal amount of advances made by BridgeBank at any time shall not exceed $8.5 million. BridgeBank reserves and withholds to 15% of the face amount of each account purchased in a reserve account.

 

The annual interest rate with respect to the daily average balance of unpaid advances outstanding under the BFA (computed on a monthly basis) is equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 1.5%, plus a monthly fee equal to 0.15% of the average outstanding balance. The BFA credit facility is collateralized with a senior security interest in certain assets of the Company. The BFA includes customary representations and warranties and default provisions for transactions of this type.

 

NOTE 7 – RELATED PARTY NOTES PAYABLE

 

Related party notes payable, consisted of the following as of:

 

  

September 30,

2023

  

December 31,

2022

 
In thousands          
Note payable –Marin  $        -   $180 
Note payable –Thomet   -    113 
Total notes payable   -    293 
Less current portion   -    (293)
Long-term portion  $-   $- 

 

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 September 30, 2023, was $73 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.

 

F-7
 

 

NOTE 8 – NOTES PAYABLE

 

(In thousands) 

September 30,

2023

   December 31,
2022		 
Note payable other   10,255    11,627 
Total   10,255    11,627 
Less current portion   8,828    11,572 
Long term notes payable  $1,427   $55 

 

Notes Payable Other

 

On July 29, 2021, the Company entered into a long-term loan from Leumi Bank totalling NIS 7 million, which at the time was approximately $2.16 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On November 28, 2021, the Company entered into another long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $1.1 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On August 11, 2021, the Company purchased vehicles using cash and financing of NIS 500 thousand, approximately $155 thousand, to be paid off in monthly interest and principal payments over 5 years. The loan accrues interest at 7.5% per annum and is secured by the vehicles.

 

On March 27, 2022, the Company entered into another long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $1.1 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totalling NIS 3 million, which at the time was approximately $0.9 million. The note accrues interest at 6.03% per annum and is payable in 36 instalments of principal and interest over 3 years.

 

During the year ended December 31, 2022, the Company entered into five short term loans totalling NIS 26.8 million, approximately $7.6 million. The note accrues average interest at 6.3% per annum.

 

On September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling 1.5M NIS. The note accrues interest at the Israeli Prime Rate plus 3.5% which currently equals 9.75% per annum and is payable in 36 monthly installments.

 

As of September 30, 2023, the Company was not in compliance with certain financial covenants related to the Bank Leumi and Bank Hapoalim debt. The Company’s failure to comply with these financial covenants could result in an event of default under its debt agreements. Therefore, we reclassified the total balance as current debt on the balance sheet. The Company is actively pursuing options to address its noncompliance. The lenders have not requested early repayment of the loan as of the date when these financial statements were available to be issued.

 

NOTE 9 – OTHER LIABILITIES

 

(In thousands) 

September 30,

2023

  

December 31,

2022

 
Other vendor payable  $803   $801 
Dividend payable   174    153 
Others   695    705 
Total other liabilities   1,672    1,659 
Less Current Portion   1,390    1,394 
Total long term other liabilities  $282   $265 

 

F-8
 

 

NOTE 10 – STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

Series A

 

As of September 30, 2023, there were 2,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250 common shares.

 

Series B

 

As of September 30, 2023, there was 1 preferred share designated and no preferred shares outstanding.

 

Series C

 

As of September 30, 2023, there were 3,000,000 Series C Preferred Shares (“Series C”) authorized with 502,000 issued and outstanding. The Series C shares have preferential rights above common shares and the Series B Preferred Shares and is entitled to receive a quarterly dividend at a rate of $0.06 per share per annum and have a liquidation preference of $1 per share. Series C shares outstanding are convertible into common stock at the rate of 20 preferred shares to one share of common stock. As of September 30, 2023, the accrued dividends on the Series C Preferred Stock were $174 thousand.

 

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 October 2021, OMNIQ’ Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in the employ of and attract new employees, directors, officers, consultants, advisors, and employees to the Company. Pursuant to the Plan, 1,118,856 shares of the Company’s common stock, par value $0.001 (the “Shares”), were set aside and reserved for issuance. The Plan was approved by our stockholders at the December 2021, shareholders’ meeting. On February 25, 2022, the Company granted 792,500 stock options. These options were granted to employees as part of the Company’s Equity Incentive Plan. No options were issued in the nine months ended September 30, 2023.

 

For the nine months ending September 30, 2023, 235,426 in stock options were exercised in exchange for 158,934 shares of OMNIQ common stock. No warrants were exercised.

 

In December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the nine months ending September 30, 2023, employees purchased 7,103 shares or $25 thousand of common stock.

 

On August 10, 2022, our Board of Directors approved issuing 10,000 shares as part of an employment agreement. Shares were issued January 3, 2023, and valued at $45 thousand.

 

F-9
 

 

NOTE 11 – LITIGATION

 

The Company was named a defendant in a case involving a former employee who claims he is owed approximately $60 thousand in unpaid commissions. The Company’s intends to defend the case. 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 in which it is defending against any claims of material significance. 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 12 – SUBSEQUENT EVENTS

 

On July 6, 2023, OmniQ Corp. (the “Company”) entered into a Share and Rights Purchase Agreement (the Agreement”) with Afcon Holdings Ltd., (“Afcon”), a company organized under the laws of the State of Israel, and Ateka Ltd. (“Ateka”), a company organized under the laws of the State of Israel (Afcon and Ateka, jointly and severally, shall be referred to together as the “Sellers”) (OminQ and its newly formed wholly owned subsidiary which shall be alternatively referred to together as the “Company” or the “Purchaser”), and Tadiran Telecom Communication Services in Israel Ltd. (“TBSI”), a company organized under the laws of the State of Israel, Tadiran Telecom Communication Services in Israel L.P. (“TBSI LP”), a limited partnership organized under the laws of the State of Israel, Tadiran Telecom Technologies (2011) Ltd. (“TTT”), a company organized under the laws of the State of Israel, Tadiran Telecom (TTL) L.P. (“TTL LP”) a limited partnership organized under the laws of the State of Israel (TBSI, TBSI LP, TTT and TTL LP shall be referred together as “TT”).

 

The Agreement provided for termination after 60 days if not renewed. On October 4, 2023, as a result of the non-fulfilment of certain conditions, the Company and the Sellers mutually terminated the Agreement, as a result of the termination, the Company will not make the $12,500,000 cash payment and the issuance of shares of common stock having a value of $2,750,000. Additionally, the Agreement provides for a mutual release of claims among the parties and their affiliates, in the event of an effective termination.

 

On October 5, 2023, OmniQ Corp. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC, as representatives (the “Representatives”) of the several underwriters named therein (collectively, the “Underwriters”), relating to the issuance and sale (the “Offering”) of 2,775,000 shares of the Company’s common stock, par value $0.001 per share, at a price to the public of $1.00 per share (the “Underwritten Shares”) and pre-funded warrants (the “Pre-Funded Warrants”) to purchase 225,000 shares of the Company’s common stock at a price to the public of $0.999 per Pre-Funded Warrant. Under the terms of the Underwriting Agreement, the Underwriters have agreed to purchase the Underwritten Shares from the Company at a price of $1.00 per share and the Pre-Funded Warrants at a price of $0.999 per Pre-Funded Warrant. The Company also granted the Underwriters an option exercisable for 45 days from the date of the Underwriting Agreement to purchase up to an additional 450,000 shares of common stock solely for the purpose of covering over-allotments (together with the Underwritten Shares, the “Shares”). All of the Shares and Pre-Funded Warrants in the Offering are being sold by the Company. The Company also issued warrants to the Representative (the “Representative’s Warrants”), exercisable to purchase 140,000 shares of common stock, at an exercise price of $1.25 per share.

 

The gross proceeds from the Offering are expected to be approximately $3.0 million before deducting underwriting discounts and commissions and other offering expenses payable by the Company and assuming no exercise of the Underwriters’ option to purchase additional shares. The Offering closed on October 11, 2023.

 

We are closely monitoring developments in the war between Israel and Hamas that began on October 7, 2023 including potential impacts to The Companies business, customers, suppliers, employees, and operations in Israel, the Middle East and elsewhere. At this time, impacts to The Company are uncertain and subject to change given the volatile nature of the situation.

 

F-10
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend”, “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.

 

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new marketing applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results may not be indicative of results or developments in subsequent periods.

 

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements after we file this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise. Investors, potential investors and other readers are urged to consider the above-mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

 

For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, as well as other reports and registration statements filed by us with the SEC. These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q and our other public filings. For more information about us and the announcements we make from time to time, visit our Internet website at www.omniq.com.

 

Introduction

 

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.

 

3
 

 

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.

 

The following is a discussion of our financial condition, results of operations, financial resources, and working capital. This discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements contained in this Form 10-Q.

 

OVERVIEW

 

The Company’s sales from operations for the nine months ended September 30, 2023, were $66 million, a decrease of approximately $12 million, or 15%, over the nine months ended September 30, 2022.

 

The loss from operations for the nine months ended September 30, 2023, was $7 million, an increase of $1 million compared with the loss in the nine months ended September 30, 2022, of $6 million. Basic loss per share from continuing operations for the nine months ended September 30, 2023, was ($1.50) versus ($1.29) per share for the same period in 2022.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2023, the Company had cash in the amount of $408 thousand and a working capital deficit of $43 million, compared to cash in the amount of $1.3 million, and a working capital deficit of $38 million as of December 31, 2022. The Company had stockholders’ deficit attributable to OmniQ stockholders of $19.2 million and $10.5 million as of September 30, 2023, and December 31, 2022, respectively. This increase in our stockholders’ deficit was primarily attributable to net losses.

 

The Company’s accumulated deficit was $96.2 million and $84.4 million as of September 30, 2023, and December 31, 2022.

 

The Company’s operations used net cash of $2.7 and $2 million in the nine months ended September 30, 2023, and 2022, respectively. The increase in cash used by operations of $650 thousand is due to the decrease in revenue and paying down accounts payable.

 

The Company’s cash provided from investing activities was $598 thousand for the nine months ended September 30, 2023, compared to cash used in investing activities of $3.9 million for the nine months ended September 30, 2022.

 

The Company’s financing activities provided $323 thousand of cash during the nine months ended September 30, 2023, and used $2.3 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, the Company made payments of $1 million on its notes payable, including its related party notes payable, compared to the payments of $3 million for the nine months ended September 30, 2022. Additionally, the Company borrowed $796 thousand on the Company’s line of credit during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, when $1.8 million was borrowed on the Company’s line of credit. Management is in the process of finalizing a new line of credit with an additional financial institution.

 

In October 2023 management finalized an equity raise which resulted in $2.5 million in net cash received from investors. See note 12 of the financial statements.

 

4
 

 

Results of Operations

 

The following tables set forth certain selected unaudited condensed consolidated statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance.

 

  

Three months ended

September 30,

   Variation 
In thousands  2023   2022   $   % 
Revenue  $17,480   $27,008   $(9,527)   (35.27%)
Cost of Goods sold   13,471    21,032    (7,561)   (35.95%)
Gross Profit   4,009    5,976    (1,967)   (32.91%)
Operating Expenses   6,631    8,634    (2,003)   (23.20%)
Loss from operations   (2,622)   (2,658)   36    (1.35%)
Net loss   (4,305)   (3,810)   (495)   12.99%
Net Loss per common Share from continuing operations  $(0.55)  $(0.52)  $(0.03)   5.77%

 

Revenues

 

For the three months ended September 30, 2023 and 2022, the Company generated net revenues in the amount of $17 million and $27 million, respectively. The decrease between the three-month periods was attributable to the decrease in demand and limitations in the supply chain.

 

Cost of Goods Sold

 

For the three months ended September 30, 2023 and 2022, the Company recognized a total of $13.4 million and $21 million, respectively, of cost of goods sold. For the three months ended September 30, 2023 and 2022, cost of goods sold were 77% and 78% of net revenues, respectively.

 

Operating expenses

 

Total operating expense for the three months ended September 30, 2023 and 2022 recognized was $6.6 million and $8.6 million, respectively, representing a 23% decrease. The decreases are related to the decrease in revenue.

 

Research and Development – Research and development expenses for the three months ended September 30, 2023 and 2022 totaled $482 thousand and $445 thousand, respectively.

 

Selling, general and Administrative – Selling, general and administrative expenses for the three months ended September 30, 2023 and 2022 totaled $5.6 million and $7.6 million, respectively, representing a 27% decrease. The decreases are related to decrease in revenue and the cost reduction plan put in place by management.

 

Depreciation – Depreciation expenses for the three months ended September 30, 2023 and 2022 totaled $146 thousand and $91 thousand, respectively, representing a 60% increase. The increase is attributable to the addition of fixed assets.

 

Intangible amortization – Intangible amortization expenses for the three months ended September 30, 2023 and 2022 totaled $418 thousand and $474 thousand, respectively.

 

5
 

 

Other income and expenses

 

Interest Expense – Interest expense for the three months ended September 30, 2023 totaled $898 thousand, as compared to $880 thousand for the three months ended September 30, 2022. The increase is primarily attributable to a additional in debt.

 

  

Nine months ended

September 30,

   Variation 
In thousands  2023   2022   $   % 
Revenue  $65,748   $77,539   $(11,791)   (15.21)%
Cost of Goods sold   52,131    59,449    (7,318)   (12.31)%
Gross Profit   13,617    18,090    (4,473)   (24.73)%
Operating Expenses   20,756    24,176    (3,420)   (14.15)%
Loss from operations   (7,139)   (6,086)   (1,053)   17.30%
Net loss   (11,678)   (9,566)   (2,112)   22.08%
Net Loss per common Share from continuing operations  $(1.50)  $(1.29)  $(0.21)   16.28%

 

Revenues

 

For the nine months ended September 30, 2023 and 2022, the Company generated net revenues in the amount of $66 million and $78 million, respectively. The decrease between the nine-month periods was attributable to the decrease in demand and limitations in the supply chain

 

Cost of Goods Sold

 

For the nine months ended September 30, 2023 and 2022, the Company recognized a total of $52 million and $59 million, respectively, of cost of goods sold. For the nine months ended September 30, 2023 and 2022, cost of goods sold were 79% and 77% of net revenues, respectively.

 

Operating expenses

 

Total operating expense for the nine months ended September 30, 2023 and 2022 recognized was $21 million and $24 million, respectively, representing a 14% decrease. The decreases are related to the cost reduction plan put in place by management.

 

Research and Development – Research and development expenses for the nine months ended September 30, 2023 and 2022 totaled $1.5 million and $1.4 million, respectively.

 

Selling, general and Administrative – Selling, general and administrative expenses for the nine months ended September 30, 2023 and 2022 totaled $18 million and $21 million, respectively, representing a 17% decrease. The decreases are related to the cost reduction plan put in place by management.

 

Depreciation – Depreciation expenses for the nine months ended September 30, 2023, and 2022 totaled $349 thousand and $241 thousand, respectively, representing a 45% increase. The increase is directly increased by the acquisition of additional fixed assets.

 

Intangible amortization – Intangible amortization expenses for the nine months ended September 30, 2023, and 2022 totaled $1.3 million and $1.3 million, respectively.

 

Other income and expenses

 

Interest Expense – Interest expense for the nine months ended September 30, 2023 totaled $2.6 million, as compared to $2.6 million for the nine months ended September 30, 2022.

 

6
 

 

Inflation

 

The Company’s results of operations have not been affected by inflation and management does not expect inflation to have a material impact on its operations in the future.

 

Off- Balance Sheet Arrangements

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable

 

ITEM 4. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

The Company’s management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e)) as of September 30, 2023, the end of the period covered by this Quarterly Report on Form 10-Q.

 

Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer (Principal Financial and Accounting Officer) concluded that, as of September 30, 2023, our disclosure controls and procedures were ineffective as of the end of the period covered to ensure that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management, including its principal executive officer and its principal financial officer, as appropriate to allow timely decisions regarding required disclosure. This was due to the following material weaknesses which are indicative of many small companies with limited staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of accounting principles generally accepted in the United States of America and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer, and our Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

 

During 2022, we identified material weaknesses in our internal control over financial reporting, which were disclosed in our annual report on Form 10-K filed with the SEC on March 31, 2023.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

We have been implementing additional internal control procedures in order to address the material weaknesses identified in our annual report on Form 10-K filed with the SEC on March 31, 2023.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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 intends to defend the case. This case was filed in the Superior Court of the State of California, County of San Diego on October 21, 2020.

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

7
 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

On August 8, 2023, Andrew MacMillan, a director of the Company passed away unexpectedly. The Company has named Independent Director, Guy Elhanani to replace Mr. MacMillan as a member of the Audit Committee and Compensation Committee.

 

On August 9, 2023, the Company received a deficiency letter from the Nasdaq Stock Market advising them that based on the Company’s Market Value of Listed Securities (“MLVS”) for the last 32 consecutive business days, the Company no longer meets the $35 million standard. The Company has 180 calendar days to regain compliance. If at anytime during this 180 day compliance period, the Company’s MLVS closes at $35 million or more for a minimum of ten consecutive business days, Nasdaq will provide you written notice of compliance and the matter will be closed. In the event that the Company does not regain compliance with the Rule prior to the expiration of the compliance period, it will receive written notification that its securities are subject to delisting. At such time, the Company may appeal the delisting determination to a Nasdaq Hearings Panel. The Company intends to put together a plan to achieve compliance.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the Securities and Exchange Commission this Form 10-Q, including exhibits. You may read and copy all or any portion of the registration statement or any reports, statements or other information in the files at SEC’s Public Reference Room located at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.

 

You can request copies of these documents upon payment of a duplicating fee by writing to the Commission. You may call the Commission at 1-800-SEC-0330 for further information on the operation of its public reference room. Our filings, including the registration statement, will also be available to you on the website maintained by the Commission at http://www.sec.gov.

 

We intend to furnish our stockholders with annual reports which will be filed electronically with the SEC containing consolidated financial statements audited by our independent auditors, and to make available to our stockholders quarterly reports for the first three quarters of each year containing unaudited interim consolidated financial statements.

 

Our website is located at http://www.omniq.com. The Company’s website and the information to be contained on that site, or connected to that site, is not part of or incorporated by reference into this filing.

 

8
 

 

ITEM 6. EXHIBITS

 

EXHIBIT INDEX

 

31.1   Certification of our Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of our Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of our Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
     
10.1   Share and Rights Purchase Agreement dated July 6, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 10, 2023).
     
101.INS   Inline XBRL Instance Document.
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

9
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 13, 2023

 

OMNIQ CORP.  
     
By: /s/ Shai Lustgarten  
  Shai Lustgarten  
  President and Chief Executive Officer  

 

10

 

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

I, Shai Lustgarten, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2023 of OMNIQ Corp.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2023 /s/ Shai Lustgarten
    Shai Lustgarten,
    Chief Executive Officer

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

I, Neev Nissenson, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2023 of OMNIQ Corp.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2023 /s/ Neev Nissenson
    Neev Nissenson
    Chief Financial Officer

 

 

 

 

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) UNDER

THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF

CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

 

Each of the undersigned, Shai Lustgarten and Neev Nissenson, certifies pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code, that (1) this quarterly report on Form 10-Q for the quarter ended September 30, 2023 of OMNIQ Corp. (the “Company”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and (2) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 13, 2023

 

  /s/ Shai Lustgarten
  Shai Lustgarten,
  Chief Executive Officer
   
  /s/ Neev Nissenson
  Neev Nissenson
  Chief Financial Officer

 

 

 

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Sep. 30, 2023
Oct. 24, 2023
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Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
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Entity Registrant Name OMNIQ Corp.  
Entity Central Index Key 0000278165  
Entity Tax Identification Number 20-3454263  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 1865 West 2100 South  
Entity Address, City or Town Salt Lake City  
Entity Address, State or Province UT  
Entity Address, Postal Zip Code 84119  
City Area Code (801)  
Local Phone Number 244-9577  
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Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   10,669,489
v3.23.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Current assets    
Cash and cash equivalents $ 408 $ 1,311
Accounts receivable, net 18,472 23,893
Inventory 6,044 8,726
Prepaid expenses 787 1,268
Other current assets 33 473
Total current assets 25,744 35,671
Property and equipment, net of accumulated depreciation of $1,084 and $1,030 respectively 1,263 1,086
Goodwill 16,363 16,542
Trade name, net of accumulated amortization of $4,768 and $4,458, respectively 1,364 1,826
Customer relationships, net of accumulated amortization of $11,161 and $10,762, respectively 3,898 4,967
Other intangibles, net of accumulated amortization of $1,569 and $1,541, respectively 532 675
Right of use lease asset 2,490 2,300
Other assets 1,399 1,744
Total Assets 53,053 64,811
Current liabilities    
Accounts payable and accrued liabilities 53,406 54,736
Line of credit 2,660 1,971
Accrued payroll and sales tax 1,653 2,633
Lease liability – current portion 1,007 942
Other current liabilities 1,390 1,394
Total current liabilities 68,944 73,541
Long term liabilities    
Notes payable, less current portion 1,427 55
Lease liability 1,519 1,404
Other long term liabilities 282 265
Total liabilities 72,245 75,337
Stockholders’ equity (deficit)    
Common stock; $0.001 par value; 15,000,000 shares authorized; 7,893,067 and 7,714,780 shares issued and outstanding, respectively. 8 8
Additional paid-in capital 75,523 73,714
Accumulated (deficit) (96,162) (84,460)
Cumulative Translation Adjustment 1,438 211
Total OmniQ stockholders’ equity (deficit) (19,192) (10,526)
Total liabilities and equity (deficit) 53,053 64,811
Series A Preferred Stock [Member]    
Stockholders’ equity (deficit)    
Preferred stock value
Series B Preferred Stock [Member]    
Stockholders’ equity (deficit)    
Preferred stock value
Series C Preferred Stock [Member]    
Stockholders’ equity (deficit)    
Preferred stock value 1 1
Related Party [Member]    
Current liabilities    
Notes payable – current portion 293
Long term liabilities    
Notes payable, less current portion
Accrued interest and accrued liabilities, related party 73 72
Nonrelated Party [Member]    
Current liabilities    
Notes payable – current portion $ 8,828 $ 11,572
v3.23.3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Property and equipment, accumulated depreciation $ 1,084 $ 1,030
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 15,000,000 15,000,000
Common stock, shares, issued 7,893,067 7,714,780
Common stock, shares outstanding 7,893,067 7,714,780
Series A Preferred Stock [Member]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares designated 2,000,000 2,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Series B Preferred Stock [Member]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares designated 1 1
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Series C Preferred Stock [Member]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares designated 3,000,000 3,000,000
Preferred stock, shares issued 502,000 544,500
Preferred stock, shares outstanding 502,000 544,500
Trade Names [Member]    
Other intangibles, accumulated amortization $ 4,768 $ 4,458
Customer Relationships [Member]    
Other intangibles, accumulated amortization 11,161 10,762
Other Intangible Assets [Member]    
Other intangibles, accumulated amortization $ 1,569 $ 1,541
v3.23.3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Revenues        
Total Revenues $ 17,480 $ 27,008 $ 65,748 $ 77,539
Cost of goods sold        
Cost of goods sold 13,471 21,032 52,131 59,449
Gross profit 4,009 5,976 13,617 18,090
Operating expenses        
Research & Development 482 445 1,464 1,436
Selling, general and administrative 5,585 7,624 17,667 21,173
Depreciation 146 91 349 241
Amortization 418 474 1,276 1,326
Total operating expenses 6,631 8,634 20,756 24,176
Loss from operations (2,622) (2,658) (7,139) (6,086)
Other income (expenses):        
Interest expense (898) (880) (2,575) (2,569)
Other (expenses) income (1,000) (217) (2,473) (870)
Total other expenses (1,898) (1,097) (5,048) (3,439)
Net Loss Before Income Taxes (4,520) (3,755) (12,187) (9,525)
Provision for Income Taxes        
Current 215 (55) 509 (41)
Total Provision for Income Taxes 215 (55) 509 (41)
Net loss (4,305) (3,810) (11,678) (9,566)
Net income attributable to noncontrolling interest 67
Net Loss attributable to OmniQ Corp (4,305) (3,810) (11,678) (9,633)
Foreign currency translation adjustment 510 241 1,227 260
Comprehensive loss (3,795) (3,569) (10,451) (9,306)
Reconciliation of net loss to net loss attributable to common shareholders        
Less: Dividends attributable to non-common stockholders’ of OmniQ Corp (8) (149) (24) (197)
Net income attributable to noncontrolling interest
Net loss attributable to common stockholders’ of OmniQ Corp $ (4,313) $ (3,959) $ (11,702) $ (9,763)
Net (loss) per share - basic attributable to common stockerholders’ of OmniQ Corp $ (0.55) $ (0.52) $ (1.50) $ (1.29)
Weighted average number of common shares outstanding – basic 7,891,444 7,578,351 7,788,262 7,545,190
v3.23.3
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($)
$ in Thousands
Preferred Stock [Member]
Series C Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Noncontrolling Interest [Member]
AOCI Attributable to Parent [Member]
Total
Balance at Dec. 31, 2021 $ 1 $ 20 $ 70,606 $ (70,571) $ 2,396 $ (154) $ 2,298
Balance, shares at Dec. 31, 2021 544 7,459          
Dividend on Class C Shares (48) (48)
ESPP Stock Issuance 8 8
ESPP Stock Issuance, shares   2          
Stock and Warrant issued for services 298 298
Stock and Warrant issued for services, shares            
Stock-based compensation – options, warrants, issuances 460 460
Exercise of stock options and warrants 41 41
Exercise of stock options and warrants, shares   99          
Cumulative Translation Adjustment (20) (10) (30)
Net (loss) income (2,636) 67 (2,569)
Balance at Mar. 31, 2022 $ 1 $ 20 71,413 (73,255) 2,443 (164) 458
Balance, shares at Mar. 31, 2022 544 7,560          
Balance at Dec. 31, 2021 $ 1 $ 20 70,606 (70,571) 2,396 (154) 2,298
Balance, shares at Dec. 31, 2021 544 7,459          
Net (loss) income             (9,566)
Balance at Sep. 30, 2022 $ 1 $ 8 72,568 (80,401) 260 (7,564)
Balance, shares at Sep. 30, 2022 544 7,612          
Balance at Mar. 31, 2022 $ 1 $ 20 71,413 (73,255) 2,443 (164) 458
Balance, shares at Mar. 31, 2022 544 7,560          
Dividend on Class C Shares (141) (141)
ESPP Stock Issuance 10 10
ESPP Stock Issuance, shares   1          
Stock-based compensation – options, warrants, issuances 743 743
Exercise of stock options and warrants 87 87
Exercise of stock options and warrants, shares   18          
Cumulative Translation Adjustment   241 241
Net (loss) income (3,186) (3,186)
Noncontrolling interests - distributions and other (668) (2,443) (3,111)
Balance at Jun. 30, 2022 $ 1 $ 20 71,585 (76,582) 77 (4,899)
Balance, shares at Jun. 30, 2022 544 7,579          
Dividend on Class C Shares (8) (8)
ESPP Stock Issuance 8 8
ESPP Stock Issuance, shares   2          
Stock and Warrant issued for services 109 109
Stock and Warrant issued for services, shares   20          
Stock-based compensation – options, warrants, issuances 834 834
Exercise of stock options and warrants 19 19
Exercise of stock options and warrants, shares   11          
Cumulative Translation Adjustment   183 183
Net (loss) income (3,810) (3,810)
Other (12) 13 (1)
Balance at Sep. 30, 2022 $ 1 $ 8 72,568 (80,401) 260 (7,564)
Balance, shares at Sep. 30, 2022 544 7,612          
Balance at Dec. 31, 2022 $ 1 $ 8 73,714 (84,460) 211 (10,526)
Balance, shares at Dec. 31, 2022 544 7,714          
Dividend on Class C Shares (8) (8)
ESPP Stock Issuance 10 10
ESPP Stock Issuance, shares   2          
Stock and Warrant issued for services 45 45
Stock and Warrant issued for services, shares   10          
Stock-based compensation – options, warrants, issuances 516 516
Exercise of stock options and warrants 173 173
Exercise of stock options and warrants, shares   156          
Cumulative Translation Adjustment 457 457
Net (loss) income (3,507) (3,507)
Conversion of shares
Conversion of equity, shares (42) 2          
Balance at Mar. 31, 2023 $ 1 $ 8 74,458 (87,975) 668 (12,840)
Balance, shares at Mar. 31, 2023 502 7,884          
Balance at Dec. 31, 2022 $ 1 $ 8 73,714 (84,460) 211 (10,526)
Balance, shares at Dec. 31, 2022 544 7,714          
Net (loss) income             (11,678)
Balance at Sep. 30, 2023 $ 1 $ 8 75,523 (96,162) 1,438 (19,192)
Balance, shares at Sep. 30, 2023 502 7,893          
Balance at Mar. 31, 2023 $ 1 $ 8 74,458 (87,975) 668 (12,840)
Balance, shares at Mar. 31, 2023 502 7,884          
Dividend on Class C Shares (8) (8)
ESPP Stock Issuance 8 8
ESPP Stock Issuance, shares   2          
Stock-based compensation – options, warrants, issuances 516 516
Exercise of stock options and warrants 18 18
Exercise of stock options and warrants, shares   4          
Cumulative Translation Adjustment 260 260
Net (loss) income (3,866) (3,866)
Balance at Jun. 30, 2023 $ 1 $ 8 75,000 (91,849) 928 (15,912)
Balance, shares at Jun. 30, 2023 502 7,890          
Dividend on Class C Shares (8) (8)
ESPP Stock Issuance 7 7
Stock and Warrant issued for services $ 45 $ 45
Stock and Warrant issued for services, shares 45,000 45,000
Stock-based compensation – options, warrants, issuances $ 516 $ 516
Cumulative Translation Adjustment 510 510
Net (loss) income (4,305) (4,305)
Balance at Sep. 30, 2023 $ 1 $ 8 $ 75,523 $ (96,162) $ 1,438 $ (19,192)
Balance, shares at Sep. 30, 2023 502 7,893          
v3.23.3
Condensed Consolidated Statements of Cash Flow - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Cash flows from operations    
Net loss $ (11,678) $ (9,566)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Loss on disposal of PP&E 46
Stock-based compensation 1,548 2,817
Stock and warrant issued for services 45
Depreciation and amortization 1,625 1,567
Amortization of ROU asset 838 695
Changes in operating assets and liabilities:    
Accounts receivable 4,097 (1,311)
Prepaid expenses 446 (502)
Inventory 2,158 (1,847)
Other assets 537 168
Accounts payable and accrued liabilities (469) 6,951
Accrued interest and accrued liabilities, related party 1 7
Accrued payroll and sales taxes payable (882) 404
Lease liability (847) (693)
Deferred tax assets, net 4 (107)
Other liabilities (74) (630)
Net cash provided by (used in) operating activities (2,651) (2,001)
Cash flows from investing activities    
Payment for additional ownership in subsidiary (3,518)
Purchase of property and equipment 457 (230)
Proceeds from sale of other assets 141 (175)
Net cash provided by (used in) investing activities 598 (3,923)
Cash flows from financing activities    
Proceeds from ESPP stock issuance 25 27
Proceeds from exercise of options and warrants 191 147
Dividends paid to non-controlling interest (1,448)
Payments on notes/loans payable (1,082) (3,092)
Proceeds from the issuance of notes/loans payable 393 4,822
Proceeds from draw on line of credit 796 1,879
Net cash (used in) provided by financing activities 323 2,335
Net change in cash and cash equivalents (1,730) (3,589)
Effect of foreign exchange rates on cash and cash equivalents 827 295
Cash and cash equivalents at beginning of period 1,311 7,085
Cash and cash equivalents at end of period 408 3,791
Non-cash activities:    
Stock issued for services 298
Declared dividends payable 24 24
Right of use asset acquired in exchange for lease liability 120
Supplemental disclosure of cash flow information:    
Cash paid for interest 2,592 2,569
Cash paid for income taxes $ 66
v3.23.3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The condensed consolidated financial statements include the accounts of OMNIQ Corp, and its wholly owned subsidiaries, referred to herein as “we,” “us,” “OMNIQ,” or the “Company”. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

 

We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. During nine-month period ended September 30, 2023, there were no significant changes to those accounting policies.

 

Net Loss Per Common Share

 

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine-months ended September 30, 2023, and 2022 were 7,788,262 and 7,545,190, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

 

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported as of:

 

  

September 30,

2023

  

September 30,

2022

 
Options to purchase common stock   1,601,657    2,173,583 
Warrants to purchase common stock   1,431,734    1,481,734 
Potential shares excluded from diluted net loss per share   3,033,391    3,655,317 

 

Contract Balances

 

We recognize revenue once the product has been shipped. For some transactions we collect a deposit on the transaction. These deposits represent cash received under noncancelable contracts before the related product or service is transferred to the customer. We record this as a customer deposit, which is included in accounts payable and other accrued expenses on our consolidated balance sheet. Such amounts are recognized as revenue by the Company upon shipment of the product or performance of the services when the revenue recognition criteria is met and generally within one year.

 

The balances of customer deposits included in accounts payable and other accrued expenses as of September 30, 2023, and December 31, 2022 were approximately $573 thousand and $1 million, respectively. The amount of revenue recognized in the nine-months ended September 30, 2023, that related to the customer deposits as of December 31, 2022 was $1.2 million.

 

 
v3.23.3
LIQUIDITY AND CAPITAL RESOURCES
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
LIQUIDITY AND CAPITAL RESOURCES

NOTE 2 – LIQUIDITY AND CAPITAL RESOURCES

 

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. The following are the principal conditions or events which potentially raise substantial doubt about the company’s ability to continue as a going concern:

 

  ● Balancing the need for operational cash with the need to add additional products
  ● Timely and cost-effective development of products
  ● Working capital deficit of $43 million as of September 30, 2023
  ● Accumulated deficit of $96 million as of September 30, 2023
  ● Multiple periods of losses from operations
  ● Noncompliance with certain debt covenants

 

These facts and others have raised concerns 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, which we have successfully accomplished to date.

 

The following conditions, plans and actions are currently being implemented to address the Company’s conditions:

 

● Outstanding warrants exist from prior offerings that could be exercised for cash depending upon the performance of our stock.
● The Company’s acquisition of Dangot Computers, Ltd. has improved the balance sheet, profitability, and cash flow and is expected to help the Company as a whole to generate positive cash flows from operations for the foreseeable future.
● The acquisition of Dangot has added capabilities to the Company which have already transformed into significant new orders in the Parking segment. Management expects the collaboration and cross sales to contribute to improved revenues and margins.
● Management is evaluating operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations.
● Blue Star - The Company’s total accounts payable due to Blue Star as of September 30, 2023, was approximately $39 million. Blue Star is an unsecured creditor, financing a substantial amount the Company’s supply chain demand. Management believes that Blue Star will continue supplying the Company with preferable credit terms. Blue Star has agreed to the annual interest rate of 5% on invoices that are past due. As an unsecured creditor of the Company, Blue Star has no incentive to force a liquidation. The Company has enjoyed a good mutual relationship for the past four years.
● Management is in the process of finalizing a new line of credit with an additional financial institution.
● In October 2023 management finalized an equity raise which resulted in $2.5 million in net cash received from investors. See note 12.

 
v3.23.3
CONCENTRATIONS
 9 Months Ended
Sep. 30, 2023
Risks and Uncertainties [Abstract]  
CONCENTRATIONS

NOTE 3 – CONCENTRATIONS

 

For the nine-months ended September 30, 2023 and the year ended December 31, 2022, no customers accounted for more than 10% and two customers accounted for 30%, respectively, of the Company’s consolidated revenues.

 

Accounts receivable at September 30, 2023 and December 31, 2022 are made up of trade receivables due from customers in the ordinary course of business. No customer accounted for more than 10% of the outstanding receivables as of September 30, 2023, or December 31, 2022.

 

For the nine months ended September 30, 2023 and the year ended December 31, 2022 one vendor made up 29% and 65%, respectively, of our purchases.

 

 
v3.23.3
BUSINESS ACQUISITION
 9 Months Ended
Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
BUSINESS ACQUISITION

NOTE 4 – BUSINESS ACQUISITION

 

Dangot Computers Ltd

 

On April 1, 2022, the Company closed on its acquisition of Dangot and exercised the remaining portion of its option to purchase 23.0% of the capital stock, thereby making Dangot a fully owned subsidiary of the Company. The Company paid $3,518,000 to purchase the additional shares. The Company utilized its working capital and a combination of short- and long-term loans.

 
v3.23.3
INVENTORY
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
INVENTORY

NOTE 5 – INVENTORY

 

Inventory consisted of the following as of:

 

In thousands  September 30, 2023   December 31, 2022 
         
Raw materials  $671   $649 
Inventory in transit   455    2,004 
Finished goods (less allowance)   4,918    6,073 
Total inventories  $6,044   $8,726 

 
v3.23.3
CREDIT FACILITIES AND LINE OF CREDIT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
CREDIT FACILITIES AND LINE OF CREDIT

NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT

 

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

 

On March 25, 2022, we entered into a Business Finance Agreement (the “BFA”) with BridgeBank a division of Western Alliance Bank (“BridgeBank”) to establish the sale of accounts receivable credit facility, whereby we may obtain short-term financing by selling and assigning acceptable accounts receivables to BridgeBank. Pursuant to the BFA, the outstanding principal amount of advances made by BridgeBank at any time shall not exceed $8.5 million. BridgeBank reserves and withholds to 15% of the face amount of each account purchased in a reserve account.

 

The annual interest rate with respect to the daily average balance of unpaid advances outstanding under the BFA (computed on a monthly basis) is equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 1.5%, plus a monthly fee equal to 0.15% of the average outstanding balance. The BFA credit facility is collateralized with a senior security interest in certain assets of the Company. The BFA includes customary representations and warranties and default provisions for transactions of this type.

 
v3.23.3
RELATED PARTY NOTES PAYABLE
 9 Months Ended
Sep. 30, 2023
Related Party Notes Payable  
RELATED PARTY NOTES PAYABLE

NOTE 7 – RELATED PARTY NOTES PAYABLE

 

Related party notes payable, consisted of the following as of:

 

  

September 30,

2023

  

December 31,

2022

 
In thousands          
Note payable –Marin  $        -   $180 
Note payable –Thomet   -    113 
Total notes payable   -    293 
Less current portion   -    (293)
Long-term portion  $-   $- 

 

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 September 30, 2023, was $73 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.

 

 
v3.23.3
NOTES PAYABLE
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
NOTES PAYABLE

NOTE 8 – NOTES PAYABLE

 

(In thousands) 

September 30,

2023

   December 31,
2022		 
Note payable other   10,255    11,627 
Total   10,255    11,627 
Less current portion   8,828    11,572 
Long term notes payable  $1,427   $55 

 

Notes Payable Other

 

On July 29, 2021, the Company entered into a long-term loan from Leumi Bank totalling NIS 7 million, which at the time was approximately $2.16 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On November 28, 2021, the Company entered into another long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $1.1 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On August 11, 2021, the Company purchased vehicles using cash and financing of NIS 500 thousand, approximately $155 thousand, to be paid off in monthly interest and principal payments over 5 years. The loan accrues interest at 7.5% per annum and is secured by the vehicles.

 

On March 27, 2022, the Company entered into another long-term loan from Leumi Bank totalling NIS 3.5 million, which at the time was approximately $1.1 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd.

 

On September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totalling NIS 3 million, which at the time was approximately $0.9 million. The note accrues interest at 6.03% per annum and is payable in 36 instalments of principal and interest over 3 years.

 

During the year ended December 31, 2022, the Company entered into five short term loans totalling NIS 26.8 million, approximately $7.6 million. The note accrues average interest at 6.3% per annum.

 

On September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling 1.5M NIS. The note accrues interest at the Israeli Prime Rate plus 3.5% which currently equals 9.75% per annum and is payable in 36 monthly installments.

 

As of September 30, 2023, the Company was not in compliance with certain financial covenants related to the Bank Leumi and Bank Hapoalim debt. The Company’s failure to comply with these financial covenants could result in an event of default under its debt agreements. Therefore, we reclassified the total balance as current debt on the balance sheet. The Company is actively pursuing options to address its noncompliance. The lenders have not requested early repayment of the loan as of the date when these financial statements were available to be issued.

 
v3.23.3
OTHER LIABILITIES
 9 Months Ended
Sep. 30, 2023
Other Liabilities Disclosure [Abstract]  
OTHER LIABILITIES

NOTE 9 – OTHER LIABILITIES

 

(In thousands) 

September 30,

2023

  

December 31,

2022

 
Other vendor payable  $803   $801 
Dividend payable   174    153 
Others   695    705 
Total other liabilities   1,672    1,659 
Less Current Portion   1,390    1,394 
Total long term other liabilities  $282   $265 

 

 
v3.23.3
STOCKHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 10 – STOCKHOLDERS’ EQUITY

 

PREFERRED STOCK

 

Series A

 

As of September 30, 2023, there were 2,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250 common shares.

 

Series B

 

As of September 30, 2023, there was 1 preferred share designated and no preferred shares outstanding.

 

Series C

 

As of September 30, 2023, there were 3,000,000 Series C Preferred Shares (“Series C”) authorized with 502,000 issued and outstanding. The Series C shares have preferential rights above common shares and the Series B Preferred Shares and is entitled to receive a quarterly dividend at a rate of $0.06 per share per annum and have a liquidation preference of $1 per share. Series C shares outstanding are convertible into common stock at the rate of 20 preferred shares to one share of common stock. As of September 30, 2023, the accrued dividends on the Series C Preferred Stock were $174 thousand.

 

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 October 2021, OMNIQ’ Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in the employ of and attract new employees, directors, officers, consultants, advisors, and employees to the Company. Pursuant to the Plan, 1,118,856 shares of the Company’s common stock, par value $0.001 (the “Shares”), were set aside and reserved for issuance. The Plan was approved by our stockholders at the December 2021, shareholders’ meeting. On February 25, 2022, the Company granted 792,500 stock options. These options were granted to employees as part of the Company’s Equity Incentive Plan. No options were issued in the nine months ended September 30, 2023.

 

For the nine months ending September 30, 2023, 235,426 in stock options were exercised in exchange for 158,934 shares of OMNIQ common stock. No warrants were exercised.

 

In December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the nine months ending September 30, 2023, employees purchased 7,103 shares or $25 thousand of common stock.

 

On August 10, 2022, our Board of Directors approved issuing 10,000 shares as part of an employment agreement. Shares were issued January 3, 2023, and valued at $45 thousand.

 

 
v3.23.3
LITIGATION
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
LITIGATION

NOTE 11 – LITIGATION

 

The Company was named a defendant in a case involving a former employee who claims he is owed approximately $60 thousand in unpaid commissions. The Company’s intends to defend the case. 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 in which it is defending against any claims of material significance. 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.

 
v3.23.3
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS

 

On July 6, 2023, OmniQ Corp. (the “Company”) entered into a Share and Rights Purchase Agreement (the Agreement”) with Afcon Holdings Ltd., (“Afcon”), a company organized under the laws of the State of Israel, and Ateka Ltd. (“Ateka”), a company organized under the laws of the State of Israel (Afcon and Ateka, jointly and severally, shall be referred to together as the “Sellers”) (OminQ and its newly formed wholly owned subsidiary which shall be alternatively referred to together as the “Company” or the “Purchaser”), and Tadiran Telecom Communication Services in Israel Ltd. (“TBSI”), a company organized under the laws of the State of Israel, Tadiran Telecom Communication Services in Israel L.P. (“TBSI LP”), a limited partnership organized under the laws of the State of Israel, Tadiran Telecom Technologies (2011) Ltd. (“TTT”), a company organized under the laws of the State of Israel, Tadiran Telecom (TTL) L.P. (“TTL LP”) a limited partnership organized under the laws of the State of Israel (TBSI, TBSI LP, TTT and TTL LP shall be referred together as “TT”).

 

The Agreement provided for termination after 60 days if not renewed. On October 4, 2023, as a result of the non-fulfilment of certain conditions, the Company and the Sellers mutually terminated the Agreement, as a result of the termination, the Company will not make the $12,500,000 cash payment and the issuance of shares of common stock having a value of $2,750,000. Additionally, the Agreement provides for a mutual release of claims among the parties and their affiliates, in the event of an effective termination.

 

On October 5, 2023, OmniQ Corp. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC, as representatives (the “Representatives”) of the several underwriters named therein (collectively, the “Underwriters”), relating to the issuance and sale (the “Offering”) of 2,775,000 shares of the Company’s common stock, par value $0.001 per share, at a price to the public of $1.00 per share (the “Underwritten Shares”) and pre-funded warrants (the “Pre-Funded Warrants”) to purchase 225,000 shares of the Company’s common stock at a price to the public of $0.999 per Pre-Funded Warrant. Under the terms of the Underwriting Agreement, the Underwriters have agreed to purchase the Underwritten Shares from the Company at a price of $1.00 per share and the Pre-Funded Warrants at a price of $0.999 per Pre-Funded Warrant. The Company also granted the Underwriters an option exercisable for 45 days from the date of the Underwriting Agreement to purchase up to an additional 450,000 shares of common stock solely for the purpose of covering over-allotments (together with the Underwritten Shares, the “Shares”). All of the Shares and Pre-Funded Warrants in the Offering are being sold by the Company. The Company also issued warrants to the Representative (the “Representative’s Warrants”), exercisable to purchase 140,000 shares of common stock, at an exercise price of $1.25 per share.

 

The gross proceeds from the Offering are expected to be approximately $3.0 million before deducting underwriting discounts and commissions and other offering expenses payable by the Company and assuming no exercise of the Underwriters’ option to purchase additional shares. The Offering closed on October 11, 2023.

 

We are closely monitoring developments in the war between Israel and Hamas that began on October 7, 2023 including potential impacts to The Companies business, customers, suppliers, employees, and operations in Israel, the Middle East and elsewhere. At this time, impacts to The Company are uncertain and subject to change given the volatile nature of the situation.
v3.23.3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Net Loss Per Common Share

Net Loss Per Common Share

 

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the nine-months ended September 30, 2023, and 2022 were 7,788,262 and 7,545,190, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

 

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported as of:

 

  

September 30,

2023

  

September 30,

2022

 
Options to purchase common stock   1,601,657    2,173,583 
Warrants to purchase common stock   1,431,734    1,481,734 
Potential shares excluded from diluted net loss per share   3,033,391    3,655,317 
v3.23.3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNING PER SHARE

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net loss per share because such securities have an anti-dilutive impact due to losses reported as of:

 

  

September 30,

2023

  

September 30,

2022

 
Options to purchase common stock   1,601,657    2,173,583 
Warrants to purchase common stock   1,431,734    1,481,734 
Potential shares excluded from diluted net loss per share   3,033,391    3,655,317 
v3.23.3
INVENTORY (Tables)
 9 Months Ended
Sep. 30, 2023
Inventory Disclosure [Abstract]  
SCHEDULE OF INVENTORY

Inventory consisted of the following as of:

 

In thousands  September 30, 2023   December 31, 2022 
         
Raw materials  $671   $649 
Inventory in transit   455    2,004 
Finished goods (less allowance)   4,918    6,073 
Total inventories  $6,044   $8,726 
v3.23.3
RELATED PARTY NOTES PAYABLE (Tables)
 9 Months Ended
Sep. 30, 2023
Related Party Notes Payable  
SCHEDULE OF NOTES PAYABLE, RELATED PARTIES

Related party notes payable, consisted of the following as of:

 

  

September 30,

2023

  

December 31,

2022

 
In thousands          
Note payable –Marin  $        -   $180 
Note payable –Thomet   -    113 
Total notes payable   -    293 
Less current portion   -    (293)
Long-term portion  $-   $- 
v3.23.3
NOTES PAYABLE (Tables)
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
SCHEDULE OF NOTES PAYABLE

 

(In thousands) 

September 30,

2023

   December 31,
2022		 
Note payable other   10,255    11,627 
Total   10,255    11,627 
Less current portion   8,828    11,572 
Long term notes payable  $1,427   $55 
v3.23.3
OTHER LIABILITIES (Tables)
 9 Months Ended
Sep. 30, 2023
Other Liabilities Disclosure [Abstract]  
SCHEDULE OF OTHER LIABILITIES

 

(In thousands) 

September 30,

2023

  

December 31,

2022

 
Other vendor payable  $803   $801 
Dividend payable   174    153 
Others   695    705 
Total other liabilities   1,672    1,659 
Less Current Portion   1,390    1,394 
Total long term other liabilities  $282   $265 
v3.23.3
SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNING PER SHARE (Details) - shares
shares in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Potential shares excluded from diluted net loss per share 3,033,391 3,655,317
Share-Based Payment Arrangement, Option [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Potential shares excluded from diluted net loss per share 1,601,657 2,173,583
Warrant [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Potential shares excluded from diluted net loss per share 1,431,734 1,481,734
v3.23.3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Weighted-average number of common shares outstanding 7,788,262 7,545,190  
Customer deposits $ 573   $ 1,000
v3.23.3
LIQUIDITY AND CAPITAL RESOURCES (Details Narrative) - USD ($)
$ in Thousands
 1 Months Ended
Oct. 31, 2023
Sep. 30, 2023
Dec. 31, 2022
Subsequent Event [Line Items]      
Working capital deficit   $ 43,000  
Accumulated deficit   $ 96,162 $ 84,460
Subsequent Event [Member]      
Subsequent Event [Line Items]      
Proceeds from equity $ 2,500    
v3.23.3
CONCENTRATIONS (Details Narrative) - Customer Concentration Risk [Member]
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Revenue Benchmark [Member] | No Customers [Member]    
Concentration Risk [Line Items]    
Concentration risk percentage 10.00% 10.00%
Revenue Benchmark [Member] | Two Customers [Member]    
Concentration Risk [Line Items]    
Concentration risk percentage 30.00% 30.00%
Accounts Receivable [Member] | No Customer [Member]    
Concentration Risk [Line Items]    
Concentration risk percentage 10.00% 10.00%
Accounts Payable [Member] | One Vendor [Member]    
Concentration Risk [Line Items]    
Concentration risk percentage 29.00% 65.00%
v3.23.3
BUSINESS ACQUISITION (Details Narrative) - Dangot Computers Ltd [Member]
Apr. 01, 2022
USD ($)
Purchase of shares, percent 23.00%
Stock issued during period, value, purchase of assets $ 3,518,000
v3.23.3
SCHEDULE OF INVENTORY (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Raw materials $ 671 $ 649
Inventory in transit 455 2,004
Finished goods (less allowance) 4,918 6,073
Total inventories $ 6,044 $ 8,726
v3.23.3
CREDIT FACILITIES AND LINE OF CREDIT (Details Narrative) - Business Finance Agreement [Member] - Bridge Bank [Member]
$ in Millions
Mar. 25, 2022
USD ($)
Line of Credit Facility [Line Items]  
Line of credit facility maximum borrowing capacity $ 8.5
Percentage of reserve account 15.00%
Line of credit, interest rate, description The annual interest rate with respect to the daily average balance of unpaid advances outstanding under the BFA (computed on a monthly basis) is equal to the “Prime Rate” of Wells Fargo Bank N.A. plus 1.5%, plus a monthly fee equal to 0.15% of the average outstanding balance.
v3.23.3
SCHEDULE OF NOTES PAYABLE, RELATED PARTIES (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Dec. 31, 2017
Short-Term Debt [Line Items]      
Long term portion $ 1,427 $ 55  
Related Party [Member]      
Short-Term Debt [Line Items]      
Total notes payable 293  
Less current portion (293)  
Long term portion  
Note Payable - Marin [Member] | Related Party [Member]      
Short-Term Debt [Line Items]      
Total notes payable 180 $ 660
Note Payable - Thomet [Member] | Related Party [Member]      
Short-Term Debt [Line Items]      
Total notes payable $ 113 $ 750
v3.23.3
RELATED PARTY NOTES PAYABLE (Details Narrative) - USD ($)
$ in Thousands
 1 Months Ended
Dec. 31, 2017
Sep. 30, 2023
Dec. 31, 2022
Aug. 11, 2021
Short-Term Debt [Line Items]        
Debt instrument, percentage       7.50%
Related Party [Member]        
Short-Term Debt [Line Items]        
Notes payable related parties   $ 293  
Note Payable - Marin [Member] | Related Party [Member]        
Short-Term Debt [Line Items]        
Notes payable related parties $ 660 180  
Debt instrument, percentage 1.89%      
Debt instrument, frequency of periodic payment 60 monthly      
Principal payments $ 20      
Accrued interest   73    
Note Payable - Thomet [Member] | Related Party [Member]        
Short-Term Debt [Line Items]        
Notes payable related parties $ 750 $ 113  
Debt instrument, percentage 0.00%      
Debt instrument, frequency of periodic payment 60 monthly      
Principal payments $ 13      
v3.23.3
SCHEDULE OF NOTES PAYABLE (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Short-Term Debt [Line Items]    
Total $ 10,255 $ 11,627
Less current portion 8,828 11,572
Long term notes payable 1,427 55
Notes Payable Other [Member]    
Short-Term Debt [Line Items]    
Total $ 10,255 $ 11,627
v3.23.3
NOTES PAYABLE (Details Narrative)
₪ in Thousands, $ in Thousands
Sep. 13, 2022
USD ($)
Integer
Mar. 27, 2022
USD ($)
Integer
Nov. 28, 2021
USD ($)
Integer
Aug. 11, 2021
USD ($)
Jul. 29, 2021
USD ($)
Integer
Sep. 21, 2023
ILS (₪)
Integer
Dec. 31, 2022
USD ($)
Dec. 31, 2022
ILS (₪)
Sep. 13, 2022
ILS (₪)
Integer
Mar. 27, 2022
ILS (₪)
Integer
Nov. 28, 2021
ILS (₪)
Integer
Aug. 11, 2021
ILS (₪)
Jul. 29, 2021
ILS (₪)
Integer
Short-Term Debt [Line Items]                          
Loans payble       $ 155               ₪ 500  
Debt interest rate       7.50%               7.50%  
Debt instrument term       5 years                  
Short term loans             $ 7,600 ₪ 26,800          
Accrues average interest             6.30% 6.30%          
Leumi Bank [Member]                          
Short-Term Debt [Line Items]                          
Loans payble   $ 1,100 $ 1,100   $ 2,160         ₪ 3,500 ₪ 3,500   ₪ 7,000
Debt interest rate   8.25% 8.25%   8.25%         8.25% 8.25%   8.25%
Number of installements   8 8   8         8 8   8
Debt instrument term   4 years 4 years   4 years                
Leumi Bank [Member] | Israeli Prime Rate [Member]                          
Short-Term Debt [Line Items]                          
Debt interest rate   4.50% 4.50%   4.50%         4.50% 4.50%   4.50%
Hapoalim Bank [Member]                          
Short-Term Debt [Line Items]                          
Loans payble $ 900               ₪ 3,000        
Debt interest rate 6.03%               6.03%        
Number of installements 36               36        
Debt instrument term 3 years                        
Tzameret Mimunim [Member]                          
Short-Term Debt [Line Items]                          
Debt interest rate           9.75%              
Number of installements           36              
Short term loans | ₪           ₪ 1,500              
Tzameret Mimunim [Member] | Israeli Prime Rate [Member]                          
Short-Term Debt [Line Items]                          
Debt interest rate           3.50%              
v3.23.3
SCHEDULE OF OTHER LIABILITIES (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Other Liabilities Disclosure [Abstract]    
Other vendor payable $ 803 $ 801
Dividend payable 174 153
Others 695 705
Total other liabilities 1,672 1,659
Less Current Portion 1,390 1,394
Total long term other liabilities $ 282 $ 265
v3.23.3
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
 1 Months Ended 3 Months Ended 9 Months Ended
Jan. 03, 2023
Aug. 10, 2022
Feb. 25, 2022
Oct. 31, 2021
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Sep. 30, 2023
Dec. 31, 2022
Class of Stock [Line Items]                        
Common stock, par value         $ 0.001           $ 0.001 $ 0.001
Stock issued during period employee stock purchase plans, value         $ 7 $ 8 $ 10 $ 8 $ 10 $ 8    
Number of shares issue service, value         45   $ 45 $ 109   $ 298    
Board of Directors [Member]                        
Class of Stock [Line Items]                        
Number of shares issue   10,000                    
Options Held [Member] | Board of Directors [Member] | Consulting Agreement [Member]                        
Class of Stock [Line Items]                        
Number of shares issue service, value $ 45                      
Common Stock [Member]                        
Class of Stock [Line Items]                        
Stock options and warrants exercised                     235,426  
Stock warrant exercised                     158,934  
Stock issued during period shares employee stock purchase plans           2 2 2 1 2    
Stock issued during period employee stock purchase plans, value            
Number of shares issue service, value                
Equity Incentive Plan [Member] | Common Stock [Member]                        
Class of Stock [Line Items]                        
Shares issued       1,118,856                
Common stock, par value       $ 0.001                
Stock options granted     792,500                  
Equity Incentive Plan [Member] | Common Stock [Member] | Options Held [Member]                        
Class of Stock [Line Items]                        
Stock options granted                     0  
Employee Stock Purchase Plan [Member] | Common Stock [Member]                        
Class of Stock [Line Items]                        
Stock issued during period shares employee stock purchase plans                     7,103  
Stock issued during period employee stock purchase plans, value                     $ 25  
Series A Preferred Stock [Member]                        
Class of Stock [Line Items]                        
Preferred stock, shares authorized         2,000,000           2,000,000 2,000,000
Preferred stock, voting rights                     The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250 common shares  
Preferred stock, shares outstanding         0           0 0
Preferred stock, shares issued         0           0 0
Series B Preferred Stock [Member]                        
Class of Stock [Line Items]                        
Preferred stock, shares authorized         1           1 1
Preferred stock, shares outstanding         0           0 0
Preferred stock, shares issued         0           0 0
Series C Preferred Stock [Member]                        
Class of Stock [Line Items]                        
Preferred stock, shares authorized         3,000,000           3,000,000 3,000,000
Preferred stock, shares outstanding         502,000           502,000 544,500
Preferred stock, shares issued         502,000           502,000 544,500
Dividends payable, amount per share         $ 0.06           $ 0.06  
Liquidation preference         $ 1           $ 1  
Accrued dividends                     $ 174  
Preferred stock conversion, description                     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  
v3.23.3
LITIGATION (Details Narrative)
$ in Thousands
Sep. 30, 2023
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Accrued liabilities for commissions, expense and taxes $ 60
v3.23.3
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
 3 Months Ended
Oct. 11, 2023
Oct. 05, 2023
Oct. 04, 2023
Sep. 30, 2023
Dec. 31, 2022
Subsequent Event [Line Items]          
Sale of common stock, shares       45,000  
Common stock, par value       $ 0.001 $ 0.001
Subsequent Event [Member]          
Subsequent Event [Line Items]          
Cash     $ 12,500,000    
Market price     $ 2,750,000    
Payments underwriting expense $ 3,000,000.0        
Subsequent Event [Member] | Underwriting Agreement [Member]          
Subsequent Event [Line Items]          
Sale of common stock, shares   2,775,000      
Common stock, par value   $ 0.001      
Common stock, public per shares   $ 1.00      
Additional common stock purchased, shares   450,000      
Subsequent Event [Member] | Pre Funded Warrants [Member]          
Subsequent Event [Line Items]          
Purchase of common stock, shares   225,000      
Shares issued, price per share   $ 0.999      
Warrants exercise price   1.00      
Subsequent Event [Member] | Underwritten Shares [Member]          
Subsequent Event [Line Items]          
Warrants exercise price   $ 1.25      
Exercisable to purchase of warrant   140,000      
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