OMNIQ Corp 10-Q for FY2025 Q3
OMNIQ Corp. (OMQS)
About this 10-Q
OMNIQ Corp filed this 10-Q on November 14, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $8.83M
- down 6.6% from $9.45M a year earlier
- Net loss
- $747K
- compared with a net loss of $1.6M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended:
For the transition period from________ to__________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(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 | ||
| OTCMKTS |
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.
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).
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 | ☐ |
| ☐ | 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: shares of common stock, $ par value, as of November 4, 2025.
TABLE OF CONTENTS
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OMNIQ CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands, except share and per share data) | As of | |||||||
| September 30, 2025 | December 31, 2024 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Goodwill | ||||||||
| Trade name, net of accumulated amortization | ||||||||
| Customer relationships, net of accumulated amortization | ||||||||
| Other intangibles, net of accumulated amortization | ||||||||
| Right of use lease asset | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Line of credit | ||||||||
| Accrued payroll and sales tax | ||||||||
| Notes payable – current portion | ||||||||
| Lease liability – current portion | ||||||||
| Related party advances | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Accrued interest and accrued liabilities, related party | ||||||||
| Notes payable, less current portion | ||||||||
| Related party notes payable | ||||||||
| Notes payable | ||||||||
| Lease liability | ||||||||
| Other long term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit) | ||||||||
| Series A Preferred stock; $ par value; shares designated, shares issued and outstanding | ||||||||
| Series B Preferred stock; $ par value; share designated, shares issued and outstanding | ||||||||
| Series C Preferred stock; $ par value; shares designated, shares issued and outstanding, respectively | ||||||||
| Preferred stock, value | ||||||||
| Common stock; $ par value; shares authorized; and shares issued and outstanding, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated (deficit) | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ||||||
| Total OmniQ stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and equity (deficit) | $ | $ | ||||||
The accompanying unaudited notes should be read in conjunction with these unaudited condensed consolidated financial statements.
F-1
OMNIQ CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three months ended | For the Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands, except share and per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research & Development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expenses) income | ( | ) | ||||||||||||||
| Gain on debt settlement | ||||||||||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for Income Taxes | ||||||||||||||||
| Current | ( | ) | ( | ) | ||||||||||||
| Total Provision for Income Taxes | ( | ) | ( | ) | ||||||||||||
| Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from discontinued operations (net of tax) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Reconciliation of net loss to net loss attributable to common shareholders | ||||||||||||||||
| Net Income (Loss) | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Less: Dividends attributable to non-common stockholders’ of OmniQ Corp | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to common stockholders’ of OmniQ Corp | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) per share - basic attributable to common stockholders’ of OmniQ Corp | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
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 | Accumulated Other | Total Stockholders’ | |||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Equity | |||||||||||||||||||||||||||
| (In thousands) | Shares | Amount | Shares | Amount | Capital | Deficit | Income (Loss) | (Deficit) | ||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| ESPP Stock Issuance | - | |||||||||||||||||||||||||||||||
| Stock and Warrant issued for services | - | - | ||||||||||||||||||||||||||||||
| Acquisition of Codeblocks | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ||||||||||||||||||||||||||||||
| Net (loss) income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| ESPP Stock Issuance | - | |||||||||||||||||||||||||||||||
| Stock and Warrant issued for services | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ||||||||||||||||||||||||||||||
| Net (loss) income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| ESPP Stock Issuance | - | |||||||||||||||||||||||||||||||
| Stock and Warrant issued for services | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net (loss) income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation – options, warrants, issuances | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ||||||||||||||||||||||||||||||
| Net (loss) income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Sale of assets from division | ||||||||||||||||||||||||||||||||
| Stock-based compensation – options, warrants, issuances | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net (loss) income | - | - | ||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Dividend on Class C Shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Shares returned and canceled | - | ( | ) | |||||||||||||||||||||||||||||
| Adjustment of goodwill portion of divestiture | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Conversion of debt to equity | ||||||||||||||||||||||||||||||||
| Stock-based compensation – options, warrants, issuances | - | - | ||||||||||||||||||||||||||||||
| Cumulative Translation Adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net (loss) income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
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
(UNAUDITED)
For the nine months ended September 30,
| (In thousands) | 2025 | 2024 | ||||||
| Cash flows from operations | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Stock and warrant issued for services | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of ROU asset | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Inventory | ||||||||
| Other assets | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Accrued interest and accrued liabilities, related party | ( | ) | ||||||
| Accrued payroll and sales taxes payable | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Deferred tax assets, net | ( | ) | ||||||
| Other liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ||||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Cash paid for divestiture | ( | ) | ||||||
| Purchase of intangible assets | ||||||||
| Proceeds from sale of property and equipment | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from ESPP stock issuance | ||||||||
| Payments on notes/loans payable | ( | ) | ( | ) | ||||
| Proceeds from draw on line of credit | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Effect of foreign exchange rates on cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Non-cash activities: | ||||||||
| Stock issued for services | $ | $ | ||||||
| Declared dividends payable | $ | $ | ||||||
| Cancelation of lease | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | $ | |||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying unaudited notes are an integral part of these unaudited condensed consolidated financial statements.
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. 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”). Interim disclosures generally do not repeat those in the annual statements.
We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in the 2024 Form 10-K. During the nine-month period ended September 30, 2025, there were no significant changes to those accounting policies.
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, 2025, and 2024 were and , 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.
SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDES FROM COMPUTATION OF EARNING PER SHARE
September 30, 2025 | September 30, 2024 | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Potential shares excluded from diluted net loss per share | ||||||||
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 $ | |
| ● | Accumulated
deficit of $ | |
| ● | Multiple years of losses from operations |
Management Evaluation
Management considers the conditions outlined above as the most significant factors in raising substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.
Management’s Plans to Mitigate and Alleviate Conditions or Events
| ● | Management is continuing to evaluate operating expenses and is developing a plan to reduce expenditures without negatively impacting current operations. | |
| ● | Management has placed a strategic focus on increasing sales with prime customers. | |
| ● | Sales efforts are focused on the most profitable product lines. |
NOTE 3 – CONCENTRATIONS
For the nine-months ended September 30, 2025 and the year ended December
31, 2024, one customer accounted for
Accounts receivable at September 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
For the nine months ended September 30, 2025 one vendor made up
The concentrations are based on the continuing operations and do not include operations from subsidiaries sold.
F-6
NOTE 4 – BUSINESS ACQUISITION
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 (approximately
US $ ). The purchase Agreement closed on February 1, 2024. As noted in Note 12, this entity was sold on
June 30, 2025.
NOTE 5 – INVENTORY
Inventory consisted of the following as of:
SCHEDULE OF INVENTORY
| In thousands | September 30, 2025 | December 31, 2024 | ||||||
| Raw materials | $ | $ | ||||||
| Inventory in transit | ||||||||
| Finished goods | ||||||||
| Less allowance for obsolescence | ( | ) | ( | ) | ||||
| Total inventories (continuing operations) | ||||||||
| Inventories related to discontinued operations | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 6 – CREDIT FACILITIES AND LINE OF CREDIT
We maintain operating lines of credit, factoring and revolving credit facilities with banks and finance companies to provide us with working capital.
On
January 18, 2024, the Company’s wholly owned subsidiary, Quest Marketing, Inc. (“Quest”) entered into a Purchase and
Sale Agreement with Prestige Capital Finance, LLC (“Prestige”), in which Quest has sold, transferred and assigned all of
its rights, title, and interest to specific accounts receivable owed to Quest. The maximum outstanding balance of Quest to Prestige shall
be $
F-7
NOTE 7 – OTHER NOTES PAYABLE
SCHEDULE OF OTHER NOTES PAYABLE
| (In thousands) | September 30, 2025 | December 31, 2024 | ||||||
| Note payable other | ||||||||
| Related party note payable | ||||||||
| Total | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term notes payable | $ | $ | ||||||
Notes Payable Other
On
July 29, 2021, the Company entered into a long-term loan from Leumi Bank totaling NIS
On
August 11, 2021, the Company purchased vehicles using cash and financing of NIS
On
September 13, 2022, the Company entered into a long-term loan from Hapoalim Bank totaling NIS
During
the year ended December 31, 2023, the Company entered into a short-term loan Hapoalim Bank totaling NIS
During
the year ended December 31, 2023, the Company entered into a short-term loan from Bank Leumi totaling NIS
On
September 21, 2023, the Company entered into a long-term loan from Tzameret Mimunim totaling
As of September 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.
As
part of the sale of the Quest division and it’s assets, and as discussed in Note 11, the Company entered into a Promissory Note
which bears interest at
F-8
NOTE 8 – OTHER INCOME
For
the nine months ended September 30, 2024, the Company received government relief funds in the amount of approximately NIS
NOTE 9 – STOCKHOLDERS’ EQUITY
PREFERRED STOCK
Series A
As
of September 30, 2025, there were Series A preferred shares designated and Series A preferred shares outstanding.
Series B
As of September 30, 2025, there was preferred share designated and preferred shares outstanding.
Series C
As
of September 30, 2025, there were Series C Preferred Shares (“Series C”) authorized with 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 $ per share per annum and have a liquidation preference of $
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, shares of the Company’s common stock, par value $ (the “Shares”), were set aside and reserved for issuance. The Plan was approved by our stockholders at the December 2021, shareholders’ meeting. No options were issued in the nine months ended September 30, 2025, except those mentioned below.
In
December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the nine months
ending September 30, 2024, employees purchased shares or $
April 8, 2024, Stockholders approved the amendment of the Company’s Certificate of Incorporation to increase the amount of authorized common stock to shares.
During June of 2025, the Company issued stock options or warrants to 47 employees and consultants for the purchase of an aggregate shares of stock at between $ and $ per share. The Company’s CEO was issued options for shares at $ and warrants were issued to a company he is affiliated with for shares at exercise price of $ per share, which was above the market price at the time of issuance. The options have a year expiration period and vested immediately. The Black Scholes calculation used approximately % volatility for the stock and approximately $ was booked as a compensation expense related to these options and warrants.
In
July 2025, the Company settled approximately $
NOTE 10 – 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.
F-9
NOTE 11 – DISCONTINUED OPERATIONS
As discussed in the prior Form 10Q and the relevant Form 8-K, 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 $
The
sale resulted in a net gain on disposal of approximately $
The net gain (APIC) was calculated as follows (in thousands):
SCHEDULE OF NET GAIN ON ADDITIONAL PAID IN CAPITAL
| Change in Value | ||||
| Cash and cash equivalents | $ | ( | ) | |
| Accounts receivable, net | ( | ) | ||
| Inventory, net | ( | ) | ||
| Other current assets | ( | ) | ||
| Property and equipment, net of accumulated depreciation | ( | ) | ||
| Accounts payable and accrued liabilities | ||||
| Other current liabilities | ( | ) | ||
| Related party notes payable | ( | ) | ||
| Additional paid-in capital | $ | ( | ) | |
Details of net loss from discontinued operations, net of taxes, are as follows (in thousands):
SCHEDULE OF DISCONTINUED OPERATIONS
| Nine months ended | September 30, 2025 | September 30, 2024 | ||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Selling, general and administrative | ||||||||
| Research & Development | ( | ) | ||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest expense | ||||||||
| Other (expenses) income | ||||||||
| Current tax | ||||||||
| Net Loss from Discontinued Ops (Net of Tax) | $ | $ | ||||||
| Three months ended | September 30, 2025 | September 30, 2024 | ||||||
| Revenues | $ | |||||||
| Cost of goods sold | ||||||||
| Selling, general and administrative | ||||||||
| Research & Development | ( | ) | ||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest expense | ||||||||
| Other (expenses) income | ||||||||
| Current tax | ||||||||
| Net Loss from Discontinued Ops (Net of Tax) | $ | $ | ||||||
F-10
Because the transaction was effective June 30,2025, no assets or liabilities disposed in the sale were included on the balance sheet as of September 30, 2025. The balances of the disposed assets and liabilities as of December 31, 2024 were as follows:
| Assets | ||||
| Current Assets | ||||
| Accounts receivable, net | $ | |||
| Inventory, net | ||||
| Prepaid expenses | ||||
| Other current assets | ||||
| Total current assets | ||||
| Property and equipment, net of accumulated depreciation | ||||
| Right of use lease asset | ||||
| Total Assets | $ | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities | ||||
| Accounts payable and accrued liabilities | $ | |||
| Accrued payroll and sales tax | ||||
| Lease liability – current portion | ||||
| Other current liabilities | ||||
| Total Current Liabilities | ||||
| Deferred revenue | ||||
| Lease liability | ||||
| Total liabilities | $ |
Cash flows related to the discontinued business have not been segregated and are included in the condensed consolidated statements of cash flows. The following table provides supplemental cash-flow information for the discontinued operations (in thousands):
SCHEDULE OF SUPPLEMENTAL CASH-FLOW INFORMATION FOR DISCONTINUED OPERATIONS
| Nine months ended September 30, 2025 | Nine months ended September 30, 2024 | |||||||
| Depreciation and amortization | ||||||||
| Capital expenditures | ( | ) | ||||||
| Other significant non-cash items | ||||||||
| Cancelation of lease | ||||||||
The assets sold include, among other things, accounts receivable, inventory, tangible personal property, intellectual property, contract rights, books and records, and other assets used or held for use in connection with the Transferred Business. Certain assets were excluded from the Transaction, including the Company’s cash and cash equivalents and all assets not related to the Transferred Business. Buyer assumed only those liabilities specified in the Purchase Agreement, and the Company retained all other liabilities, including those unrelated to the Transferred Business or expressly 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
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 $
NOTE 12 – LITIGATION
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
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
$
On June 30, 2025, the Company’s subsidiary Dangot Computers reached
at settlement with one of its vendors in Israel related to past due rebates and price protection payments entitled under prior agreements.
The vendor agreed to pay Dangot Computers, approximately USD$
NOTE 13 – SUBSEQUENT EVENTS
On November 10, 2025, with effective date of November 1, 2025, the Board
of Directors agreed to extend the employment contract of Shai Lustgarten, which previously was set to expire in 2027, is now set to expire
November 1, 2029.
F-12
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. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:
| ● | Our ability to raise capital when needed and on acceptable terms and conditions; | |
| ● | Our ability to manage credit and debt structures from vendors, debt holders, and secured lenders. | |
| ● | Our ability to manage the growth of our business through internal growth and acquisitions; | |
| ● | Competitive pressures; | |
| ● | Our ability to attract and retain management, and to integrate and maintain technical information and management information systems. | |
| ● | Compliance with laws and regulations, including those relating to environmental matters, corporate governance matters and tax matters, as well as any future changes to such laws and regulations; and |
For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our 2024 Form 10-K and Item 1A — “Risk Factors” in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, as well as other reports and registration statements filed by us with the SEC. These factors should not be construed as exhaustive and should be read with other cautionary statements in this Quarterly Report on Form 10-Q and our other public filings. For more information about us and the announcements we make from time to time, visit our website at www.omniq.com.
Introduction
We use patented and proprietary artificial intelligence (AI) technology to deliver machine vision image processing solutions including data collection, real-time surveillance and monitoring for supply chain management, homeland security, public safety, traffic & parking management, and access control applications.
The technology and services we provide help our clients move people, assets, and data safely and securely through airports, warehouses, schools, national borders, and many other applications and environments.
Our principal solutions include hardware, software, communications, and automated management services, technical service and support. Our highly tenured team of professionals has the knowledge and expertise to simplify the integration process for our customers. We deliver practical problem-solving solutions backed by numerous customer references.
Our customers include government agencies, healthcare, universities, airports, municipalities and more. We currently engage with several billion-dollar markets with double-digit growth, including the Global Safe City market and the Ticketless Safe Parking market.
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.
3
OVERVIEW
Pursuant to the asset sale described in the Notes to the Financial Statements, the assets of one division was sold during the second quarter of 2025. Accordingly, the financial statements have reclassified the related revenues and expenses from both prior periods and the current period into a single line item for “Discontinued Operations” on the face of the financial statements, with further detail provided in the accompanying Notes.
The Company’s sales from operations for the nine months ended September 30, 2025, were $24 million, a decrease of approximately $2.8 million, or 10%, over the nine months ended September 30, 2024.
The loss from operations for the nine months ended September 30, 2025, was $1.3 million, a decrease of $1.8 million compared with the loss in the nine months ended September 30, 2024, of $3.1 million. Basic loss per share from continuing operations for the nine months ended September 30, 2025, was $0.09 versus loss of ($0.46) per share for the same period in 2024.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2025, the Company had cash in the amount of $679 thousand and a working capital deficit of $11.8 million, compared to cash in the amount of $2.3 million, and a working capital deficit of $54 million as of December 31, 2024. The Company had stockholders’ deficit attributable to OmniQ stockholders of $13 million and $43.9 million as of September 30, 2025, and December 31, 2024, respectively. This decrease in our stockholders’ deficit was primarily attributable to the sale of one of the divisions at June 30, 2025.
The Company’s accumulated deficit was $124.7 million and $123.9 million as of September 30, 2025, and December 31, 2024.
The Company’s operations provided net cash of $5.4 million and provided $230 thousand in the nine months ended September 30, 2025, and 2024, respectively. The increase in cash used by operations of $5.2 million is due to an increase in accounts receivables being received as well as reliance on accounts payable being accrued.
The Company’s cash used in investing activities was $2.5 million for the nine months ended September 30, 2025, compared to cash used by investing activities of $87 thousand for the nine months ended September 30, 2024.
The Company’s financing activities used $2 million of cash during the nine months ended September 30, 2025, and used $2.4 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2025, the Company made payments of $3.4 million on its notes payable, compared to the payments of $2.7 million for the nine months ended September 30, 2024.
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 | 2025 | 2024 | $ | % | ||||||||||||
| Revenue | $ | 8,826 | $ | 9,454 | $ | (628 | ) | (6.64 | )% | |||||||
| Cost of Goods sold | $ | 5,867 | $ | 7,362 | $ | (1,495 | ) | (20.31 | )% | |||||||
| Gross Profit | $ | 2,959 | $ | 2,092 | $ | 867 | 41.44 | % | ||||||||
| Operating Expenses | $ | 3,550 | $ | 2,879 | $ | 671 | 23.31 | % | ||||||||
| Loss from operations | $ | (591 | ) | $ | (787 | ) | $ | 196 | (24.90 | )% | ||||||
| Net loss | $ | (747 | ) | $ | (1,600 | ) | $ | 853 | (53.31 | )% | ||||||
| Net Loss per common Share from continuing operations | $ | (0.06 | ) | $ | (0.08 | ) | $ | 0.02 | (26.60 | )% | ||||||
Revenues
For the three months ended September 30, 2025 and 2024, the Company generated net revenues in the amount of $8.8 million and $9.5 million, respectively. The decrease between the three-month periods was attributable to the focusing on more profitable revenue and timing on some orders.
Cost of Goods Sold
For the three months ended September 30, 2025 and 2024, the Company recognized a total of $5.9 million and $7.43 million, respectively, of cost of goods sold. For the three months ended September 30, 2025 and 2024, cost of goods sold were 66% and 78% of net revenues, respectively.
Operating expenses
Total operating expenses for the three months ended September 30, 2025 and 2024 recognized was $3.6 million and $2.9 million, respectively, representing a 23% increase. The increase is related to the additional commissions incurred on the sale of the division.
Research and Development – Research and development expenses for the three months ended September 30, 2025 and 2024 totaled $436 thousand and $492 thousand, respectively.
Selling, general and Administrative – Selling, general and administrative expenses for the three months ended September 30, 2025 and 2024 totaled $2.9 million and $2.1 million, respectively, representing a 41% increase. The increases are related to increases in salaries for key people in 2025 relative to 2024.
Depreciation – Depreciation expenses for the three months ended September 30, 2025 and 2024 totaled $17 thousand and $85 thousand, respectively, representing an 80% decrease.
Intangible amortization – Intangible amortization expenses for the three months ended September 30, 2025 and 2024 totaled $245 thousand and $228 thousand, respectively.
Other income and expenses
Interest Expense – Interest expense for the three months ended September 30, 2025 totaled $248 thousand, as compared to $250 thousand for the three months ended September 30, 2024.
| For the nine months ended September 30, | Variation | |||||||||||||||
| In thousands | 2025 | 2024 | $ | % | ||||||||||||
| Revenue | $ | 24,213 | $ | 27,040 | $ | (2,827 | ) | (10.45 | )% | |||||||
| Cost of Goods sold | 17,089 | 20,820 | (3,731 | ) | (17.92 | )% | ||||||||||
| Gross Profit | 7,124 | 6,220 | 904 | 14.53 | % | |||||||||||
| Operating Expenses | 8,392 | 9,275 | (883 | ) | (9.52 | )% | ||||||||||
| Loss from operations | (1,268 | ) | (3,055 | ) | 1,787 | (58.49 | )% | |||||||||
| Net loss | (784 | ) | (6,743 | ) | 5,959 | (88.37 | )% | |||||||||
| Net Loss per common Share from continuing operations | $ | 0.09 | $ | (0.46 | ) | $ | 0.55 | (118.61 | )% | |||||||
5
Revenues
For the nine months ended September 30, 2025 and 2024, the Company generated net revenues in the amount of $24.2 million and $27.0 million, respectively. The decrease between the nine-month periods was attributable to the decrease in demand.
Cost of Goods Sold
For the nine months ended September 30, 2025 and 2024, the Company recognized a total of $17.1 million and $20.8 million, respectively, of cost of goods sold. For the nine months ended September 30, 2025 and 2024, cost of goods sold were 71% and 77% of net revenues, respectively.
Operating expenses
Total operating expenses for the nine months ended September 30, 2025 and 2024 recognized was $8.4 million and $9.3 million, respectively, representing a 9.5% 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, 2025 and 2024 totaled $1.4 million and $1.3 million, respectively.
Selling, general and Administrative – Selling, general and administrative expenses for the nine months ended September 30, 2025 and 2024 totaled $6.2 million and $6.9 million, respectively, representing a 10.5% 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, 2025, and 2024 totaled $53 thousand and $284 thousand, respectively.
Intangible amortization – Intangible amortization expenses for the nine months ended September 30, 2025, and 2024 totaled $713 thousand and $686 million, respectively.
Other income and expenses
Interest Expense – Interest expense for the nine months ended September 30, 2025 totaled $651 thousand, as compared to $820 thousand million for the nine months ended September 30, 2024.
Inflation
The Company’s results of operations have not been materially affected by inflation and management does not expect inflation to have a material impact on its operations in the future.
Off- Balance Sheet Arrangements
The Company currently does not have any off-balance sheet arrangements.
Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes annual assessments of the SOC reports of our providers and implementing complementary controls. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2025. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the previously reported material weakness in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of September 30, 2025. Although we have determined that the existing controls and procedures are not effective, the deficiencies identified have not been deemed material to our reporting disclosures.
Material Weakness in Internal Control over Financial Reporting
In connection with the audit of our financial statements for the year ended December 31, 2024, we identified a material weakness in our internal control over financial reporting. Specifically, we identified a material weakness in our controls related to segregation of duties and other immaterial weaknesses in several areas of data management and documentation.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 30, 2025, the Company’s subsidiary Dangot Computers reached a settlement with one of its vendors in Israel related to past due rebates and price protection payments entitled under prior agreements. The vendor agreed to pay Dangot Computers, approximately USD$1.2 million over a 12 month period, based on certain milestones related to additional purchases. These payments are being treated as reduction in Cost of Goods sold upon receipt from the Vendor.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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 the consolidated financial statements audited by our independent auditors, and to make available to our stockholder’s 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 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
| 10.1 | Employment Agreement by and Between the Company and Shai Lustgarten effective November 1, 2025 | |
| 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) | |
| 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 14, 2025
| OMNIQ CORP. | ||
| By: | /s/ Shai Lustgarten | |
| Shai Lustgarten | ||
| Chief Executive Officer, Interim Chief Financial Officer and Chairman of the Board | ||
10
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is entered into as of November 1, 2025 (the “Effective Date”) by and between OMNIQ Corp., a Delaware corporation (the “Company”), and Shai Lustgarten, an individual (the “Executive”).
WHEREAS, the Company and Executive entered into that certain Letter Agreement, dated September 5, 2019 and employment agreement dd Feb 2020 and subsequently revised on April 1, 2023
WHEREAS, the Company and Executive desire to have this Agreement replace the Agreement signed on April 2023 as the governing document for Executive’s employment with the Company.
NOW, THEREFORE, in consideration of the premises and conditions set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:
1. Duties and Responsibilities.
1.1 Positions. Executive shall serve as the Company’s President and Chief Executive Officer (“CEO”), with such duties as are customarily associated with the position of a CEO for a public company. As part of these duties, Executive shall report to and perform the specific duties and responsibilities assigned to him by the Company’s Board of Directors during his tenure as CEO.
1.2 Efforts; Other Activities. Executive agrees to devote his best efforts, attention and energies to advance the business and welfare of the Company, to render his services under this Agreement, faithfully, diligently, competently and to the best of his ability. Executive may conduct other non-competitive business or hold other positions or directorships with other non-competitive for- profit entities, provided that those activities do not create a conflict of interest with the Company or do not interfere with the performance of Executive’s duties to the Company. Executive may, without the prior approval of the Board, serve in any capacity with any civic, education, or charitable non-profit organization, provided such service does not interfere with Executive’s duties to the Company.
1.3 Location; Travel. Executive shall be based, as per his determination, at the Company’s headquarters in Murray, Utah . Executive will be required to travel from time to time to other geographic locations in connection with the performance of his duties.
2. Agreement Term. Except as otherwise provided for herein, the term of this Agreement with Executive shall commence on the Effective Date and terminate on the four-year anniversary of the Effective Date (the “Termination Date”) (the duration between the Effective Date and Termination shall hereinafter be referred to as the “Term”). At that time, the parties will address and negotiate in good faith any mutually agreeable extension or replacement of this Agreement. Even so, the parties agree that the Executive’s employment with the Company during the Term, notwithstanding the provisions of this Agreement or the potential for any extensions thereof or subsequent agreements, may be terminated by either Executive or the Company at any time, for any or no reason, with or without Cause (as defined below), and pursuant to the terms provided below. After the Expiration date of this Agreement, the Parties agree that the Term of this Agreement shall automatically be extended for consecutive periods of one (1) year each time, unless, not less than ninety (90) days preceding such anniversary date, the Parties to this Agreement shall decide not to extend the term of this Agreement.
3. Compensation and Benefits.
3.1 Base Salary. Executive’s base salary under this Agreement shall be Eight Hundred and Fifty Thousand Dollars ($850,000.00) (U.S.) per year (less applicable withholdings), which shall be payable as provided by law and in accordance with the Company’s standard payroll schedule, together with such increases as may be approved by the Company’s Compensation Committee and Board of Directors from time to time in their sole discretion (the “Base Salary”). This amount shall increase 5% per year on the anniversary of the Agreement to account for Cost of Living increases.
3.2 Executive Bonus Plan. Executive shall be eligible to participate in the Company’s and/or Company’s Subsidiaries and/or Affiliates, Executive Bonus Plan/s, as it may exist from time to time, which will include both cash and equity components and be based on measurable objectives established by the Company’s Board of Directors for achievement in free cash flow, EBITDA, cost reduction, and/or any other factors the Board of Directors selects in its sole discretion. Such objectives shall be generated and approved by the Compensation Committee. The timing and frequency of the payout of Executive’s bonuses as CEO will be determined and confirmed by the Compensation Committee of the Board prior to payout.
3.3 Equity Awards, As CEO, Executive shall be eligible to participate in the Company’s and/or Company’s Subsidiaries and/or Affiliates, Equity Incentive Plan/s and receive, inter alia, additional stock options or grants in the Company and/or Company’s Subsidiaries and/or Affiliates, which will be determined during the duration of Executive’s employment with the Company (the “Employment Period”) and offered both at times and in amounts subject to the Board of Directors’ sole discretion. All such awards under the Company’s and/or Company’s Subsidiaries and/or Affiliates, Equity Incentive Plan/s shall be subject to a vesting schedule determined by the Compensation Committee of the Board of Directors.
3.4 Paid Time Off. Executive shall receive four (4) weeks of paid time off (“PTO”) per calendar year, which amount shall accrue in accordance with and subject to any caps on accrual established by the Company’s vacation policy in effect from time to time for employees of the Company. In addition, Executive shall be entitled to paid time off for all holidays provided under the Company’s regular holiday schedule.
3.5 National Securities Exchange Bonus. If the Company or any of its subsidiaries and/or affiliates is successful in listing or offering its securities, or the securities of any subsidiary thereof, on the OTC and or a foreign exchange and/or on NASDAQ or New York Stock Exchange markets and such a listing or offering shall be consummated within 24 months of the Effective Date, then the Executive shall be entitled to a $90,000 onetime payment which shall be paid on the 1st day that the Company’s, or any subsidiary thereof, shares become traded on such national exchange. If any of the companies traded on OTC or foreign exchange uplists to a national exchange, Executive will be entitled to a one-time $90,000 bonus.
3.6 Equity Financing Bonus. If the Company procures equity financing in an amount equal to or greater than $2,000,000 during the term of this Agreement, then the Executive shall be entitled to a success fee of $60,000 upon the Company’s receipt of at least $2,000,000. Executive’s right to receive such fee shall remain in force for a period of 24 months immediately following the termination of this Agreement. If the Company procures equity financing in an amount equal to or greater than $4,000,000 during the term of this Agreement, then the executive shall be entitled to a success fee of $120,000 upon the Company’s receipt of at least $4,000,000. Executive right to receive such fee shall remain in force for a period of 24 months immediately following the termination of this Agreement. If the Company procures equity financing in an amount equal to or greater than $6,000,000 during the term of this Agreement, then the executive shall be entitled to a success fee of $ 240,000 executive right to receive such fee shall remain in force for a period of 24 months immediately following the termination of this Agreement. If the Company procures equity financing in an amount equal to or greater than $12,000,000 during the term of this Agreement, then the executive shall be entitled to a success fee to be determined by the Board of Directors but not less than $400,000 upon the Company’s receipt of at least $$12,000,000. Executive right to receive such fee shall remain in force for a period of 24 months immediately following the termination of this Agreement. If the Company procures equity financing in an amount equal to or greater than $15,000,000 during the term of this Agreement, then the executive shall be entitled to a success fee to be determined by the Board of Directors but not less than $500,000. If the Company procures equity financing in an amount equal to or greater than $2,000,000 during the term of this Agreement, then the Executive shall be entitled to a success fee of $60,000 upon the Company’s receipt of at least $2,000,000. Executive’s right to receive such fee shall remain in force for a period of 24 months immediately following the termination of this Agreement.
3.7 M&A Bonus.
| (a) | If the Company and/or Company’s Subsidiaries and/or Affiliates, closes any M&A transaction with a third party target during the term of this Agreement, then the Executive shall be entitled to a success fee in the amount equal to two percent (3%) of the total gross transaction price, in any combination of cash and shares to be determined by the Executive, to be paid to the Executive within two (2) weeks of the closing of such transaction. | |
| (b) | If the Company and/or Company’s Subsidiaries and/or Affiliates, closes any M&A transaction in which it is the acquired company and/or Company’s Subsidiaries and/or Affiliates, then the Executive shall be entitled to a success fee in the amount equal to four percent (4%) of the total gross transaction price, in any combination of cash and shares to be determined by the Executive, to be paid to the Executive within two (2) weeks of the closing of such transaction. | |
| (c) | The fees described in this Section 3.7 shall also apply to any M&A transaction that closes after the term of this Agreement but which the Executive substantially contributed to prior to the termination of this Agreement. |
3.8 Sales Bonus. If the Company achieves at least $680,000,000 in sales in any fiscal year covered by this Agreement, then the Executive shall receive a bonus within a reasonable time after the end of such fiscal year. The Executive shall receive:
Up to $100M => 1% of total revenue
From $100-120M => 1% of $100M revenue + 0.75% for the additional revenue between $100M and $120M From $120M and up => 1% of $100M revenue + 0.75% for the additional revenue between $100M and $120M + 1% for the additional revenue over $120M
3.9 Market Capitalization Bonus. In addition to all other compensation and benefits provided herein, as the current market capitalization as of the signing of this agreement is approximately $1 million, the Executive shall be entitled to receive the following performance-based bonuses tied to the Company’s market capitalization:
If the Company achieves a market capitalization in excess of Ten Million Dollars ($10,000,000), as determined below and maintained for thirty (30) consecutive trading days, the Executive shall receive a one-time bonus of One Hundred Thousand Dollars ($100,000). Thereafter, the Executive shall be entitled to receive an additional one-time bonus equal to one percent (1%) of the Company’s market capitalization (calculated at the applicable threshold) each time the Company’s market capitalization increases by an additional Ten Million Dollar ($10,000,000) increment above the initial Ten Million Dollar level, and such increased market capitalization is maintained for thirty (30) consecutive trading days.
For example, upon the Company achieving and maintaining a Twenty Million Dollar ($20,000,000) market capitalization for thirty (30) consecutive trading days, the Executive shall receive a one-time bonus of Two Hundred Thousand Dollars ($200,000); upon achieving a Thirty Million Dollar ($30,000,000) market capitalization, a bonus of Three Hundred Thousand Dollars ($300,000); and so forth.
For purposes of this Agreement, “market capitalization” shall mean the product of (a) the total number of the Company’s issued and outstanding shares of common stock as of the applicable measurement date, and (b) the average closing price per share of the Company’s common stock over the relevant thirty (30) consecutive trading-day period as reported on the principal exchange or quotation system on which the Company’s shares are traded.
Each such milestone bonus shall be payable within thirty (30) days following the end of the applicable measurement period and, at the Executive’s sole option, may be received either (i) in cash or (ii) in shares of the Company’s common stock, valued at the average closing price during the same thirty (30) consecutive trading-day period used to determine the applicable market capitalization threshold.
3.10 Group Benefit Plans; Individual Insurance. Executive shall, throughout the Employment Period, be eligible to participate in all of the group term life insurance plans, group health plans, dental plans, accidental death and dismemberment plans, short-term disability programs, retirement plans, profit sharing plans, 401 (k), employee stock purchase plans or other plans for which Executive qualifies that are available to the executive officers of the Company as provided under the terms of such plans. With respect to any of the foregoing benefits, Executive may elect to receive the cash value of the premiums the Company would otherwise pay as additional compensation. In addition, during the Employment Period, the Company shall pay, on behalf of Executive, up to $20,000 per calendar year toward the premium(s) of a life insurance policy insuring Executive’s life. Such payment may be applied, at Executive’s discretion, to either (a) a new policy designated and owned by Executive, or (b) an existing policy currently owned by Executive. Executive shall retain all ownership rights and beneficiary designations with respect to any such policy, and the Company shall have no ownership or beneficial interest therein. Any such payments shall be treated as taxable compensation to Executive only to the extent required by law.
3.11 Withholdings. The Company shall deduct and withhold from any compensation payable to Executive hereunder (including but not limited to, any payments or benefits under this Section 3 and any payments or benefits under Section 5), any and all applicable federal and state income and employment withholding taxes and any other amounts the Company determines are required to be deducted or withheld by the Company under applicable statutes, regulations, ordinances or orders governing or requiring the withholding or deduction of amounts otherwise payable as compensation or wages to employees.
4. Expense Reimbursement. During the Employment Period, Executive shall be entitled to, in accordance with the reimbursement policies in effect from time to time, receive reimbursement from the Company for reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder, including, but not limited to, a car allowance ($1,840 per month) and international and intrastate flights, provided Executive furnishes the Company with vouchers, receipts and other details of such expenses in the form required by the Company sufficient to substantiate a deduction for the business expenses in question under all applicable rules and regulations of federal and state taxing authorities. Executive shall be entitled to be accompanied by his significant other in two business trips per year and Executive’s significant other’s travelling expenses will also be covered by the Company.
5. Termination of Employment. During the Term of this Agreement, Executive’s employment with the Company shall be at-will and may be terminated by either the Company or Executive, for any reason not prohibited by law. During the first 12 months, the Executive can terminate the Agreement without cause and subject to 90 days’ prior written notice. After the first 12 months, either party may terminate the Agreement without cause, subject to 90 days’ prior written notice to the other party. If such termination occurs before the Termination Date, then Executive shall have no further rights to any other compensation or benefits from the Company under this Agreement other than the “Separation Benefits” as set forth in Section 5.l.
5.1 Separation Benefits. In the event the Executive resigns from the Company voluntarily, then the Company shall pay to Executive the following:
(a) Executive’s unpaid Base Salary that has been earned through the date that Executive’s employment with the Company is terminated (the “Early Termination Date”);
(b) Executive’s accrued but unused vacation:
(c) Any accrued but unpaid expenses pursuant to Section 4 above;
(d) Such vested accrued benefits, and other benefits and/or payments, if any, as to which the Executive (and his eligible dependents) may be entitled under, and in accordance with the terms and conditions of, the employee benefit arrangements, plans and programs of the Company as of the Early Termination Date (including, for example, the presentment of the right to continue health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), as applicable), but not including any severance pay plan; and
(e) Any other payments as may be required under applicable law. The benefits provided under subsections (a) through (d) of this Section 5.1 are collectively referred to as the “Separation Benefits.”
5.2 Termination without Cause or Resignation for Good Reason.
(a) Early Termination Benefits. If during the Term of this Agreement, the Executive voluntarily resigns for Good Reason (as defined below) or the Company terminates Executive’s employment for any reason other than for Cause (as defined below), then the Company shall pay to the Executive the following compensation and benefits in addition to the Separation Benefits set forth in Section 5.1, subject to the conditions set forth in Section 6 and contingent upon the Executive’s execution and delivery of a general release of claims in favor of the Company, its affiliates and representatives, the form of which is acceptable to the Company:
(i) Severance Payment. A lump sum payment equal to the greater of (A) the unpaid Base Salary through the end of the Term of this Agreement, at the rate in effect on the Early Termination Date, that otherwise would have been paid to the Executive if he remained employed through the end of this Agreement’s full Term, or (B) one (1) year of Base Salary, at the rate in effect on the Early Termination Date. Subject to Sections 7 and 8, the lump sum payment required by this Section shall be paid no later than thirty (30) days following the Early Termination Date.
(ii) COBRA Reimbursement. In the event that the Executive properly and timely elects to continue health benefit coverage under COBRA after the Early Termination Date and the Company received from Executive of a copy of such election and proof of Executive’s timely payment of each COBRA premium, the Company shall promptly reimburse Executive on a taxable basis for the amount of each such premium paid by Executive. Such COBRA premium reimbursements will be paid by the Company for coverage until the earliest of (A) the end of the period of time during which the Executive is entitled to continuation coverage under COBRA, or (B) such time as Executive subsequently becomes covered by another group health plan. Executive agrees to notify the Company immediately if he becomes covered by another group health plan. If, on the Early Termination Date, the Company determines in its sole discretion that it cannot reimburse the Executive for the COBRA premiums as provided in this Section 5.2(a)(ii) above without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to the Executive monthly payments (the “Section 5.2(a)(ii) Taxable Payments”) during the maximum period for which COBRA premiums otherwise were to be reimbursed. The amount of each monthly payment shall equal the COBRA premium that the Executive would be required to pay to continue his healthcare benefits under the Company’s group plans for the first month of COBRA coverage. For the avoidance of doubt, the Section 5.2(a)(ii) Taxable Payments, if any, will be made regardless of whether the Executive elects COBRA continuation coverage and may be used for any purpose, including, but not limited to continuation coverage under COBRA.
(b) Definition of Cause. For purposes of this Agreement, “Cause” shall mean any of the following:
(i) Executive’s misappropriation of the Company’s funds or property, or any attempt by Executive to secure any personal profit related to the business or business opportunities of the Company without the informed, written approval of the Audit Committee of the Company’s Board of Directors;
(ii) Any unauthorized use or disclosure by Executive of confidential information or trade secrets of the Company (or any parent or subsidiary of the Company);
(iii) Executive’s willful failure to perform, or continuing neglect in the performance of, duties lawfully assigned to Executive by the Company’s Board of Directors, provided that the Company shall have provided Executive with written notice of such failure or neglect and the Executive has been afforded at least ten (10) business days to cure such failure or neglect;
(iv) Executive’s conviction of, or plea of nolo contendre to, any felony or misdemeanor involving moral turpitude or fraud, or of any other crime involving material harm to the standing or reputation of the Company;
(v) Any other willful misconduct by Executive that the Board determines in good faith has had a material adverse effect upon the business or reputation of the Company;
(vi) Any other material breach or violation by the Executive of this Agreement, the Company’s written code of conduct, or other written policy of the Company that has been provided to the Executive; provided, however, that the Company shall have provided the Executive with written notice that such actions are occurring and the Executive has been afforded at least ten (10) business days to cure.
Notwithstanding the foregoing, in subparagraphs (iii) and (vi), (A) the cure period shall apply neither to violations of the Company’s code of conduct or prohibition against unlawful harassment, and (B) such cure period shall only apply to breaches, violations, failures or neglect that in the Board’s sole judgment are capable of or amenable to such cure.
(c) Definition of Good Reason. For the purposes of this Agreement, “Good Reason” shall mean Executive’s voluntary resignation upon any of the following events:
(i) A material reduction in Executive’s authority, duties or responsibilities (and not simply a change in title or reporting relationships);
(ii) A material reduction by the Company in the Executive’s compensation (for avoidance of doubt, a ten percent (10%) reduction in the Executive’s Base Salary shall constitute a material reduction in Executive’s compensation);
(iii) Any breach by the Company of its obligations under this Agreement that results in material adverse consequences to Executive including but not limited to the failure to issue Executive the Stock Grant or the Signing Stock Options; or
(iv) The failure of any buyer or acquirer of the Company in a change in control to assume the Company’s obligations to Executive under this Agreement.
Notwithstanding the foregoing, “Good Reason” shall only be found to exist if the Executive provides written notice to the Company identifying and describing the event resulting in Good Reason within ninety (90) days of the initial existence of such event (“Good Reason Notice”), the Company does not cure such event within thirty (30) days following receipt of the Good Reason Notice from the Executive, and the Executive terminates his employment during the ninety (90)- day period beginning thirty (30) days after the Executive’s delivery of the Good Reason Notice. Section 3.5, 3.7, 3.8 and Section 3.9 Performance Bonus Metrics will be eligible and payable to the Executive, regardless of reasons for termination for six (6) months following their exit from the Company. Section 3.6, as stated above, will remain in place for 24 months immediately following the termination of this Agreement.
6. Restrictive Covenants.
6.1 Noncompetition. Executive agrees that, for the duration of his employment with the Company and for a period of one (1) year after the termination thereof, Executive shall not engage in, or have any direct or indirect interest in any person, firm, corporation, organization, entity or business in North America - whether as an employee, officer, owner, director, agent, security holder, investor, creditor, consultant, partner, or otherwise - which engages in business that is similar to, or competitive with, the Company’s business.
6.2 Confidentiality. The Company and Executive acknowledge that the services to be performed by Executive under this Agreement are unique and extraordinary and, as a result of such employment, Executive shall be in possession of Confidential Information relating to the business practices of the Company and its subsidiaries and affiliates (collectively, the “Company Group”). The term “Confidential Information” shall mean any and all information (oral and written) relating to the Company Group, or any of their respective activities, or of the clients, customers, acquisition targets, investment models or business practices of the Company Group, other than such information that (a) is generally available to the public or within the relevant trade or industry, other than as the result of breach of the provisions of this Section, or (b) is required of Executive to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. The Executive shall not, during his Employment Period with the Company or at any time thereafter (except as may be required in the course of the performance of his duties hereunder and except with respect to any litigation or arbitration involving this Agreement, including the enforcement hereof), directly or indirectly, use, communicate, disclose or disseminate to any person, firm or corporation any Confidential Information acquired by the Executive during, or as a result of, his employment with the Company, without the prior written consent of the Company. The confidentiality obligations contained in this Section 6.2 shall be in addition to any other confidentiality agreement entered into between the Company and Executive, including the proprietary information and invention assignment agreement to be signed by Executive as per the Company’s policy with respect to all employees.
6.3 Mutual Non-Disparagement. At no time during Executive’s Employment Period with the Company or within three (3) years after the termination thereof, will the Executive, directly or indirectly, disparage the Company Group or any of the Company Group’s past or present employees, officers, directors, attorneys, products or services. Notwithstanding the foregoing, nothing in this Section shall prevent Executive from making any truthful statement to the extent (a) necessary to rebut any untrue public statements made about him; (b) necessary with respect to any litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; or (c) required or specifically protected by law, or any court, arbitrator, mediator or administrative or legislative body (including any committee thereof’) with appropriate jurisdiction.
(ii) At no time during Executive’s Employment Period with the Company or within three (3) years after the termination thereof, will the Company or any of its then officers and/or directors, directly or indirectly, disparage the Executive. Notwithstanding the forgoing, nothing in this Section shall prevent the Company from making any truthful statement to the extent (a) Necessary to rebut any untrue public statements made by the Executive about the Company; (b) Necessary with respect to any litigation, arbitration or mediation involving this Agreement, including, but not limited to, the enforcement of this Agreement; or (c) required or specifically protected by law, or any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with appropriate jurisdiction.
6.4 Cooperation. Upon the receipt of reasonable notice from the Company (including from the Company’s outside counsel), Executive agrees that during his Employment Period with the Company and at any time thereafter, Executive will respond and provide information to the best of his ability with regard to matters about which Executive has knowledge as a result of his employment with the Company, and will provide reasonable assistance to the Company Group and their respective representatives in defense of any claims that may be made against the Company Group (or any member thereof), and will also provide reasonable assistance to the Company Group in the prosecution of any claims that may be made by the Company Group (or any member thereof), to the extent that such claims may relate to matters related to Executive’s Employment Period with the Company (or any predecessors). If the Executive is required to provide any services pursuant to this Section following his termination, then the Company:
(a) shall promptly compensate Executive for all time actually incurred in these activities at an hourly rate of pay equal to Executive’s most recent annual Base Salary divided by 2080 hours; and
(b) shall promptly reimburse the Executive for reasonable out-of-pocket travel, lodging, communication and duplication expenses incurred in connection with the performance of such services and in accordance with the Company’s business expense reimbursement policies.
6.5 Injunctive Relief; Interpretation. Without limiting the remedies available to the Company, Executive acknowledges and agrees that a breach of any of the covenants contained in Section 6 will result in the material and irreparable injury to the Company, the Company Group, or their respective affiliates or subsidiaries, for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such breach or threat by Executive, the Company shall be entitled to a temporary restraining order and/or a preliminary or permanent injunction restraining Executive from engaging in activities prohibited by this Section 6, without the necessity of posting a bond or other security. If for any reason it is held that the restrictions under this Section 6 are not valid or enforceable as written, such restrictions shall be interpreted or modified to render such restrictions valid and enforceable, and such interpretation or modification shall be to render such restrictions as broad as legally permissible.
6.6 Return of Company Property. Upon the cessation of Executive’s employment for any reason whatsoever, all Company Group property that is in the possession of the Executive shall be promptly returned to the Company, including, without limitation, all documents, records, notebooks, equipment, price lists, specifications, programs, customer and prospective customer lists, supplier lists and any other materials that contain or are derived from Confidential Information which are in the Executive’s possession, including all copies thereof whether in electronic, digital or paper form. Anything to the contrary notwithstanding, Executive shall be entitled to retain (a) papers and other materials of a personal nature, including, but not limited to, photographs, correspondence, personal diaries, calendars and rolodexes, personal files and phone books, (b) information showing his compensation or relating to reimbursement of expenses, (c) information that he reasonably believes may be needed for tax purposes and (d) copies of plans, programs and agreements relating to his employment, or termination thereof, with the Company.
7. Section 409A.
7.1 Interpretation. It is intended that the provisions of this Agreement comply with the requirements of Section 409A of the Internal Revenue Code (“Section 409A”) or an exemption therefrom, and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. A termination of employment shall not be deemed to have occurred for purposes of any payments or benefits subject to Section 409A that are to be paid or provided upon or following a termination of employment unless such termination qualifies as a “separation from service” within the meaning of Section 409A and, for purposes of any such payments or benefits, references in this agreement to “termination,” “termination of employment” or like terms shall mean “separation from service.” For purposes of Section 409A, each payment under this Agreement shall be treated as a separate payment. In no event may Executive, directly or indirectly, designate the calendar year of a payment. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause Executive to incur any additional tax or interest under Section 409A. the Company shall, upon the specific request of Executive, use its reasonable business efforts to in good faith reform such provision to comply with Section 409A; provided that, to the maximum extent practicable, the original intent and economic benefit to Executive and the Company of the applicable provision shall be maintained, but the Company shall have no obligation to make any changes that could create any additional economic cost or loss of benefit to the Company. Notwithstanding the foregoing, the Company shall not have any liability with regard to any failure of this Agreement to comply with Section 409A so long as it has acted in good faith with regard to compliance therewith.
7.2 Section 409A Delay. Notwithstanding any other provisions of this Agreement to the contrary, and solely to the extent necessary for compliance with Section 409A and not otherwise eligible for exclusion from the requirements of Section 409A, if as of the date of Executive’s separation from employment from the Company, (a) the Executive is deemed to be a “specified employee” (within the meaning of Section 409A), and (b) the Company or any member of a controlled group including the Company is publicly traded on an established securities market or otherwise, no payment or other distribution required to be made to the Executive hereunder (including any payment of cash, any transfer of property and any provision of taxable benefits) as a result of Executive’s separation from service shall be made until the date that is the earlier of (i) the first day of the seventh month following the date on which Executive separates from service with the Company, or (ii) the date of Executive’s death. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 7.2 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum, and all remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
7.3 Reimbursements and In-Kind Benefits. To the extent that reimbursements or other in- kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Section 409A, (a) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (b) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (c) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense was incurred.
8. Section 280G.
8.1 Maximum Benefit. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to Executive or for Executive’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code (“Section 2H0G”) and would, but for this Section 8.1, be subject to the excise tax imposed under Code Section 4999 (or any successor provision thereto) (the “Excise Tax”), then prior to making the Covered Payments, a calculation will be made comparing (a) the Net Benefit (as defined below) to Executive of the Covered Payments after payment of the Excise Tax, to (b) the Net Benefit to Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (a) above is less than the amount calculated under (b) above, the Covered Payments will be reduced or eliminated to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. “Net Benefit” means the present value of the Covered Payments net of all federal, state, local and foreign income, employment and excise taxes.
8.2 Order of Reduction. Any reduction or elimination of Covered Payments necessary pursuant to Section 8.1 will be made in accordance with Section 409A and the following:
(a) the Covered Payments that do not constitute nonqualified deferred compensation subject to Section 409A will be reduced or eliminated first in such order as may be specified by Executive (or, if Executive does not provide written notice to the Company specifying such order within 10 days of Executive’s receipt of a written notice from the Company requesting such information, the order specified by the Company); and
(b) all other Covered Payments will then be reduced or eliminated in the following order: (i) cash payments, (ii) non-cash-forms of benefits (other than equity-based payments and acceleration of vesting) and (iii ) equity-based payments and acceleration of vesting.
To the extent payments are to be reduced or eliminated pursuant to clause (b) above, payments or benefits to be made or provided on a later date will be reduced or eliminated before payments or benefits to be made or provided on an earlier date. Notwithstanding the foregoing, if the order of reduction or elimination specified in clause (b) would violate Section 409A, then the reduction or elimination shall be made in such other manner as may be necessary to comply with Section 409A.
8.3 Recalculation. If, notwithstanding the initial application of this Section 8, the Internal Revenue Service determines that all or any portion of any Covered Payment constitutes an excess parachute payment (as defined in Section 280G(b) of the Code), this Section 8 will be reapplied based on the Internal Revenue Service’s determination, and Executive will be required to promptly repay the portion of the Covered Payments required to avoid imposition of an excise tax under Section 4999 of the Code together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of Executive’s receipt of the excess payments until the date of repayment).
8.4 Determinations. Any determination required under this Section 8, including whether any payments or benefits are parachute payments, shall be made by the Company in its sole discretion. Executive will provide the Company with such information and documents as the Company may reasonably request in order to make a determination under this Section 8. For purposes of making the calculations and determinations required by this Section 8, the Company may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999. The Company shall bear all costs incurred in connection with any calculations contemplated by this Section 8. The Company’s determination will be final and binding on Executive.
9. Miscellaneous.
9.1 Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Company at its headquarters in Murray, Utah to the attention of the Secretary, and to the Executive at the address last reflected on the Company’s payroll records, or such other address as either party may hereafter designate in writing to the other. Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as provided herein, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Any such notice shall be deemed given only when received, but if Executive is no longer employed by the Company or a subsidiary, such notice shall be deemed to have been duly given five (5) business days after the date it is mailed in accordance with the foregoing provisions of this Section.
9.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be unenforceable only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any other provision of this Agreement. Furthermore, there shall be automatically substituted for any prohibited or invalid provision a provision as similar thereto as possible that is valid, legal and enforceable.
9.3 Binding Effect; Benefits. This is a contract pertaining to personal services. Accordingly, Executive may not delegate his duties or assign his rights under this Agreement. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, legal representatives, successors and the Company’s assigns.
9.4 Entire Agreement. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous agreements, arrangements or understandings between the Company and Executive, except the Company’s policies and procedures as in effect from time to time and those plans and other arrangements which are specifically mentioned herein and incorporated by reference as a result. This Agreement may be amended at any time by mutual written agreement of the parties. In the case of any conflict between any express term of this Agreement and any statement contained in any plan, program, arrangement, employment manual, memo or rule of general applicability of the Company, this Agreement shall control.
9.5 Governing Law, Binding Arbitration, and Choice of Venue. This Agreement and the performance of the parties hereunder shall be governed by the substantive laws of the State of Utah (without applying its conflicts of laws provisions) and any applicable laws of United States of America, and shall be interpreted in conformity with the same. The parties agree that any dispute or difference between them with respect to or arising from this Agreement - whether about its content, execution, enforceability, or performance - and any dispute or different between them concerning or relating to Executive’s employment with the Company or the termination thereof shall be, and is, subject to mandatory, final and binding arbitration, which shall be conducted and governed pursuant to the rules and procedures of the American Arbitration Association. BOTH THE COMPANY AND EXECUTIVE, THEREFORE, WAIVE ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY FOR ANY SUCH DISPUTE. The parties further agree that any such arbitration shall be conducted in Murray, Utah, and they expressly agree to submit themselves to the jurisdiction of the federal and state courts located in Salt Lake County, Utah.
9.6 Remedies. All rights and remedies provided pursuant to this Agreement or by law shall be cumulative, and no such right or remedy shall be exclusive of any other. A party may pursue any one or more rights or remedies hereunder or may seek damages, injunctive relief or specific performance in the event of another party’s breach or may pursue any other remedy at law or equity, whether or not stated in this Agreement.
9.7 Breach of this Agreement. Executive understands and agrees that if he breaches any provision of this Agreement, specifically including without limitation the restrictive covenants contained in Section 6, all payments and benefits provided hereunder shall cease, and any continuing obligation the Company may have to Executive under this Agreement shall be deemed subject to a full accord and satisfaction and thus no longer chargeable against the Company. If the Company’s participation in any legal action is necessary to enforce the terms of this Agreement because of Executive’s breach - whether such action is brought by Executive, the Company, or a third party - the Company shall be entitled to reimbursement of the reasonable costs and attorneys’ fees it incurs in defending, pursuing or otherwise participating in such legal action in the event that such court determines that such breach is the fault of Executive.
9.8 Survivorship. Except as otherwise expressly set forth in this Agreement, the respective rights and obligations of the parties shall survive Executive’s cessation of employment to the extent necessary to carry out the intentions of the parties as embodied and expressed in this Agreement. This Agreement shall continue in effect until there are no further rights or obligations of the parties outstanding hereunder and shall not be terminated by either party without the express prior written consent of both parties.
9.9 Neutral Interpretation. The parties agree that this Agreement shall not be construed either for or against either of them in any dispute or interpretation hereof.
9.10 No Waiver. The waiver by either party of a breach of any provision of this Agreement shall not operate as, or be construed as, a waiver of any later breach of that provision.
9.11 Taxes. Except as otherwise specifically provided herein, each party agrees to be responsible for its own taxes and penalties.
9.12 Counterparts. This Agreement may be executed and delivered in counterparts (including by facsimile or pdf’) which, when taken together, shall constitute one and the same agreement of the parties.
9.13 Representation of Executive. Executive represents and warrants to the Company that Executive has read and understands this Agreement, has had the opportunity to consult with independent legal counsel of his choosing prior to agreeing to the terms of this Agreement and is entering into this Agreement in a knowing, willful and voluntary manner.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement as of the date first above written.
| COMPANY | EMPLOYEE | |||
| By: | /s/ Guy Elhanani | By: | /s/ Shai Lustgarten | |
| Independent Board Member and Chair of Compensation Committee | as Individual | |||
| By: | /s/ Shai Lustgarten | |
| Chief Executive Officer and Chairman | ||
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, 2025 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 14, 2025 | /s/ Shai Lustgarten |
| Shai Lustgarten, | |
| Chief Executive Officer, Interim Chief Financial Officer and Chairman of the Board |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL 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, 2025 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 14, 2025 | /s/ Shai Lustgarten |
| Shai Lustgarten | |
| Principal 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
The undersigned, Shai Lustgarten, 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, 2025 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 14, 2025
| /s/ Shai Lustgarten | |
| Shai Lustgarten, | |
| Chief Executive Officer, Interim Chief Financial Officer and Chairman of the Board | |
| /s/ Shai Lustgarten | |
| Shai Lustgarten | |
| Principal Financial Officer |