OMNIQ Corp.

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. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”).

We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in the 2024 Form 10-K. During the six-month period ended June 30, 2025, there were no significant changes to those accounting policies other than below.

Accounting Standards Updates

ASU 2023-09, “Income Taxes (Topic 740), Improvement to Income Tax Disclosures.” The amendments in ASU 2023-09 require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s financial statements.

Net Loss Per Common Share

Net loss per share is provided in accordance with FASB ASC 260-10, “Earnings per Share”. Basic net loss per common share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. The weighted-average number of common shares outstanding for computing basic EPS for the three-months ended June 30, 2025, and 2024 were 10,712,930 and 10,688,340, respectively. Diluted net loss per share of common stock is the same as basic net loss per share of common stock because the effects of potentially dilutive securities are antidilutive.

The following table sets forth the potentially dilutive securities excluded from the computation of diluted net income or loss per share because such securities have an anti-dilutive impact and are out of the money:

**NOTE 2 –GOING CONCERN **

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

Management Evaluation

Management considers the conditions outlined above as the most significant factors in raising substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Management’s Plans to Mitigate and Alleviate Conditions or Events

NOTE 3 –CONCENTRATIONS

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

Accounts receivable at June 30, 2025 and December 31, 2024 are made up of trade receivables due from customers in the ordinary course of business. One customer accounted for 6% of the outstanding receivables as of June 30, 2025, and 26% as of December 31, 2024.

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

NOTE 4 –BUSINESS COMBINATIONS

CodeBlocks LTD

On January 30, 2024, OMNIQ’s wholly owned subsidiary, Dangot Computers Ltd. (“Dangot”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with CodeBlocks Ltd. (CodeBlocks”) and CodeBlocks’ owners, Alina Lifshits and Erez Attia pursuant to which Dangot, acquired all of the capital stock of CodeBlocks in exchange for NIS 4,666,664 (approximately US $1,275,044). The consideration is payable in seven equal installments with the final payment due on November 1, 2025. The note has no explicit interest rate so the Company used an implicit interest rate of 8%; therefore the present value for the acquisition was NIS 4,356,720, approximately $1,190,360. The purchase Agreement closed on February 1, 2024. As of June 30, 2025, this entity was sold as part of the sale discussed in Note 11.

NOTE 5 –INVENTORY

Inventory consisted of the following as of:

NOTE 6 –CREDIT FACILITIES AND LINE OF CREDIT

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

On January 18, 2024, the Company’s wholly owned subsidiary, Quest Marketing, Inc. (“Quest”) entered into a Purchase and Sale Agreement with Prestige Capital Finance, LLC (“Prestige”), in which Quest has sold, transferred and assigned all of its rights, title, and interest to specific accounts receivable owed to Quest. The maximum outstanding balance of Quest to Prestige shall be $7.5 million. The discount fee starts at 1.5% and increases based on the age of the outstanding receivables. The balance as of June 30, 2025, was $0 and this credit facility was terminated concurrent with the sale of the assets from Quest Marketing, Inc.

NOTE 7 –RELATED PARTY NOTES PAYABLE

Note Payable – Marin

In December 2017, we entered into a $660 thousand note payable at 1.89% annual interest rate (the “Marin Note”) with two individuals from whom we previously acquired their company (in 2014). The Marin Note was payable in 60 monthly principal payments of $20 thousand beginning in October 2018. Accrued interest payable as of March 31, 2025 and December 31, 2024, was $73 thousand and $73, respectively. Accrued interest was payable at maturity. This accrued interest balance was $0 as of June 30, 2025.

Note Payable – Summit

On June 30, 2025, concurrent with the sale of the business unit, the Company entered into a promissory note for $10 million at 5% annual interest rate (the “Summit Note”), the note is amortized over 10 years, but a balloon payment in 3 years for the then balance. The Company is required to make 13 payments every year, with annual payments totaling $1,378,852. Accrued interest as of June 30, 2025 was $0 and the balance as of June 30, 2025 was $10,000,000. At June 30, 2025, the company had put up a $200,000 prepaid expense towards transaction costs with Summit Junction and this amount appears on the Balance Sheet as a prepaid expenses, related party.

NOTE 8 –OTHER NOTES PAYABLE

Notes Payable Other

On July 29, 2021, the Company entered into a long-term loan from Leumi Bank totaling NIS 7 million, which at the time was approximately $2.16 million. The note accrues interest at the Israeli Prime Rate plus 4.5% which currently equals 8.25% per annum and is payable in 8 instalments of principal and interest over 4 years. The note is secured by shares of Dangot Computers, Ltd At December 31, 2024, the balance owed is $1,815,840 and at June 30, 2025, the balance owed is $1,886,466 NIS (approx. $528,211 USD).

On August 11, 2021, the Company purchased vehicles using cash and financing of NIS 500 thousand, approximately $155 thousand, to be paid off in monthly interest and principal payments over 5 years. The loan accrues interest at 7.5% per annum and is secured by the vehicles. This was completed in January 2025.

On September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totaling NIS 3 million, approximately US $0.9 million. The note accrues interest at 7.28% per annum (Israeli Prime Rate plus 1.28%) and is payable in 36 installments of principal and interest over 3 years. The balance at June 30, 2025 was approximately $0.14 million.

During the year ended December 31, 2023, the Company entered into a short-term loan Hapoalim Bank totaling NIS 2.5 million, approximately US $0.67 million. The note accrues interest at 7.3% per annum. The loan is renewed every month at Israeli Prime Rate plus +1.3%, which at December 31, 2024 was 7.3%. In February 2024, NIS 1.5 million of the loan was converted into a short-term loan to be repaid in 12 installments, bearing interest at Prime +1.5%. In July 2024, an additional 1.5 million was converted into a long-term loan to be repaid in 18 installments, bearing interest at a rate of Prime +1.5%. At December 31, 2024, the Company owed Hapoalim Bank USD $1.39 million. At June 30, 2025, the balance was approximately $1.5 million.

During the year ended December 31, 2023, the Company entered into a short-term loan from Bank Leumi totaling NIS 21.5 million, approximately US $5.9 million. The note accrues interest at 7.6% per annum. The loan is renewed every month at Israeli Prime Rate plus 1.89, which at December 31, 2024 was 7.89%. In March 2024, NIS 7.5 million of the loan was converted into a long-term loan to be repaid in 36 installments, bearing interest at a rate of Prime +3.25%, which at December 31, 2024 was 9.25%. At December 31, 2024, the Company owed Bank Leumi USD $5.4 million. At June 30, 2025, the Company owed Bank Leumi approximately USD $5.4 million.

On September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling 1.5 M NIS, approximately US $393 thousand. The note accrues interest at the Israeli Prime Rate plus 3.5% which currently equals 9.5% per annum and is payable in 36 monthly installments. The balance at December 31, 2024 is $251 thousand and at June 30, 2025 was $212 thousand.

As of June 30, 2025, the Company was not in compliance with certain financial covenants related to the Bank Leumi and Bank Hapoalim debt. The Company’s failure to comply with these financial covenants could result in an event of default under its debt agreements. 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 INCOME **

For the six months ended June 30, 2025, the Company received government relief funds in the amount of approximately NIS 1.7 million or US $609 thousand.

During the six months ended June 30, 2025, the Company received Employee Retention Credit refunds in the amount of approximately $1.05 million for returns filed for prior years.

NOTE 10 –STOCKHOLDERS’ EQUITY

PREFERRED STOCK

Series A

As of June 30, 2025, there were 2,000,000 Series A preferred shares designated andno Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 13 common shares.

Series B

As of June 30, 2025, there was 1 preferred share designated andno preferred shares outstanding.

Series C

As of June 30, 2025, there were 3,000,000 Series C Preferred Shares (“Series C”) authorized with 502,000 issued and outstanding. The Series C shares have preferential rights above common shares and the Series B Preferred Shares and is entitled to receive a quarterly dividend at a rate of $0.06 per share per annum and have a liquidation preference of $1 per share. Series C shares outstanding are convertible into common stock at the rate of 20 preferred shares to one share of common stock. As of June 30, 2025, the accrued dividends on the Series C Preferred Stock was $226 thousand.

The Series C Preferred Stock has a liquidation value and conversion price of $1.00 per share ($20.00 per 20 shares of preferred stock which convert to one share of common stock) and automatically converts into Common Stock at $1.00 per share ($20.00 per 20 shares of preferred stock which convert to one share of common stock) in the event that the Company’s common stock has a closing price of $30 per share for 20 consecutive trading days.

EQUITY INCENTIVE PLAN

In October 2021, OMNIQ’ Board of Directors adopted an Equity Incentive Plan (the “Plan”), as an incentive to retain in the employ of and attract new employees, directors, officers, advisors, and employees to the Company. Pursuant to the Plan,1,118,856 shares of the Company’s common stock, par value $0.001 (the “Shares”), were set aside and reserved for issuance. The Plan was approved by our stockholders at the December 2021, shareholders’ meeting.

No shares were issued in the six months ended June 30, 2025 and 17,089 shares were issued during the six months ended June 30, 2024.

During the quarter, the Company issued stock options or warrants to 47 employees and consultants for the purchase of an aggregate 1,035,000 shares of stock at between $0.06 and $0.07 per share. The Company’s CEO was issued options for 50,000 shares at $0.07 and warrants were issued to a company he is affiliated with for 100,000 shares at exercise price of $0.07 per share, which was above the market price at the time of issuance. The options have a 5 year expiration period and vested immediately. Approximately $63,000 was booked as a compensation expense related to these options and warrants.

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. This case was settled in February 2024.

On November 3, 2024 a commercial real estate company filed a lawsuit against Dangot Computers, OmniQ Technologies and some of Dangot’s officers alleging breach of a letter of intent for a lease arrangement. The claims were brought in an Israeli court. The initial claim against Dangot Computers is NIS 21 million approximately US $5.6 million. The Company believes that it has meritorious defenses to such action and intends to vigorously defend itself; however, at this stage it is too early to assess the chances of the lawsuit with certainty.

In March 2025, the Company was named a defendant in a case involving a consultant who was terminated and who claims he is owed approximately $389 thousand in unpaid fees and commissions. The Company believes it has multiple defenses and cross claims against the former consultant and is evaluating its response to the lawsuit, but plans to vigorously defend the suit.

NOTE 12 –BUSINESS SEGMENT

The Company operates in a single reportable segment, referred to as providing solutions including software, communications, and automated management service. The business is managed by the chief executive officer who is the Chief Operating Decision Maker (CODM). The CODM evaluates segment performance based on operating income (loss) for purposes of allocating resources and evaluating financial performance. The accounting policies of our single reportable segment are the same as those for the Company as a whole.

Note 13 –DISCONTINUED OPERATIONS

On July 11, 2025, OmniQ Corp., a Delaware corporation (the “Company”), together with its subsidiaries, Quest Marketing, Inc., HTS Image Processing, Inc., OmniQ Vision Inc., HTS Image Ltd., OmniQ Technologies Ltd., and Dangot Computers, Ltd. (collectively, the “Sellers”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Summit Junction Holdings LLC, a Delaware limited liability company (the “Buyer”).

Pursuant to the Purchase Agreement, the Sellers agreed to sell, and Buyer agreed to purchase, substantially all of the assets and assume certain liabilities mainly associated with the Company’s legacy business line, including its integrated hardware, software, and automation solutions business, (the “Transferred Business”). The Transaction was consummated on July 11, 2025. Although the Purchase Agreement is dated as of June 30, 2025, the parties executed the agreement and consummated the Transaction on July 11, 2025.

The aggregate consideration for the Transaction is approximately $45.0 million, consisting of the assumption by Buyer of up to $55.0 million in specified liabilities of the Transferred Business and the issuance by the Company of a Promissory Note in the principal amount of $10.0 million in favor of the Buyer. The Promissory Note bears interest at 5% per annum, is amortized over a ten-year period, and provides for a balloon payment after the third year. In addition, the Company is entitled to a contingent payment of up to $10.0 million in the event that, within 18 months following the closing, Buyer either (i) consummates a sale of all or substantially all of its assets or equity for consideration in excess of $100.0 million or (ii) completes an initial public offering at a valuation exceeding $100.0 million.

The sale resulted in a net gain on disposal of approximately $34.7 m, which reflects the difference between the carrying amount of the net assets disposed of and the consideration transferred/assumed, including the promissory note and transaction costs. However, due to the related-party nature of the transaction, management determined it would be more conservative to record the gain to Additional Paid-in Capital instead of in Other Income.

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

Details of net loss fromdiscontinued operations, net of taxes, are as follows (in thousands):

Because the transaction was effective June 30,2025, no assets or liabilities disposed in the sale were included on the balance sheet as of June 30, 2025. The balances of the disposed assets and liabilities as of December 31, 2024 were as follows:

Cash flows related to the discontinued business have not been segregated and are included in the condensed consolidated statements of cash flows. The following table provides supplemental cash-flow information for the discontinued operations (in thousands):

The assets sold include, among other things, accounts receivable, inventory, tangible personal property, intellectual property, contract rights, books and records, and other assets used or held for use in connection with the Transferred Business. Certain assets were excluded from the Transaction, including the Company’s cash and cash equivalents and all assets not related to the Transferred Business. Buyer assumed only those liabilities specified in the Purchase Agreement, and the Company retained all other liabilities, including those unrelated to the Transferred Business or expressly excluded.

The Purchase Agreement contains customary representations, warranties, and covenants, including pre-closing operating covenants, post-closing indemnification provisions, and certain limitations on liability. The Transaction and Purchase Agreement were approved by the Company’s Board of Directors effective June 30, 2025 following completion of a fairness opinion, dated June 27, 2025, from an independent financial advisor.

In connection with the closing, the Company and Buyer entered into and delivered various ancillary agreements, including a Bill of Sale, Assignment and Assumption Agreement, Trademark Assignment Agreement, Promissory Note, Intellectual Property License Agreement, and Transition Services Agreement. The Company also entered into a consent agreement with its largest vendor Bluestar to consent to the transfer of the liabilities owed to it from the Company to the Buyer. Due to an entity affiliated with Shai Lustgarten, the Company’s CEO as a principal member of the Buyer, the transaction is deemed related party.

Pursuant to his employment contract, the CEO, Shai Lustgarten is entitled to a bonus equal to 4% of a total transaction price and pursuant to that, the Board of Directors awarded a bonus of $1.72 million to Mr. Lustgarten. The bonus has been accrued but as of this filing nothing has been paid on the bonus.

Based on ASC 850-10, ASC 845-10, ASC 820, and SEC Staff Accounting Bulletin Topics 5.G, 5.T, and 1.B.1, the transaction represents a capital contribution from the CEO to the Company. While a fairness opinion was obtained, it does not fully satisfy ASC 820 fair value measurement requirements for full recognition. Accordingly, the $34 million gain is recorded directly to equity as a capital contribution. This conclusion aligns with both the letter and the spirit of applicable GAAP and SEC guidance.

NOTE 14 –SUBSEQUENT EVENTS

In July 2025, the Company settled approximately $62,500 of debt owed on the books for 900,000 shares. As noted in the Company’s 8-K filing,450,000 of those shares were issued to the Company CEO, Shai Lustgarten to settled $31,500 owed to him.

In July 2025, the Company relocated its corporate headquarters to a new address. The new office / warehouse lease is at $15,000 per month in rent for 7 years.