Omniq (OMQS) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements For the quarter ended March 31, 2025, OMNIQ Corp. reported an 8.7% revenue increase to $19.9 million and a reduced operating loss of $0.69 million, despite significant stockholders' and working capital deficits Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $35.1 million, while total liabilities also decreased, resulting in a worsening working capital deficit of $55.1 million and a total stockholders' deficit of $45.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,712 | $2,349 | | Accounts receivable, net | $15,798 | $20,945 | | Total current assets | $24,028 | $31,880 | | Total Assets | $35,110 | $43,589 | | Liabilities & Equity | | | | Accounts payable and accrued liabilities | $64,850 | $66,097 | | Total current liabilities | $79,190 | $86,323 | | Total liabilities | $80,601 | $87,477 | | Total OmniQ stockholders' equity (deficit) | $(45,491) | $(43,888) | - The company has a significant working capital deficit of $55.1 million as of March 31, 2025[28] - The accumulated deficit reached $126.0 million as of March 31, 2025, an increase from $123.9 million at the end of 2024[10][28] Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended March 31, 2025, revenues increased by 8.7% to $19.9 million, gross profit remained stable, and the loss from operations significantly reduced to $0.69 million due to lower operating expenses, while net loss per share remained unchanged Consolidated Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $19,903 | $18,317 | | Gross Profit | $5,141 | $5,058 | | Loss from operations | $(690) | $(1,259) | | Net Loss | $(2,089) | $(2,098) | | Net loss per share - basic | $(0.20) | $(0.20) | - Operating expenses decreased to $5.8 million from $6.3 million year-over-year, primarily due to a reduction in selling, general and administrative costs[12] Condensed Consolidated Statements of Stockholders' Equity (Deficit) The total stockholders' deficit increased from $43.9 million to $45.5 million as of March 31, 2025, primarily driven by a net loss of $2.1 million, slightly offset by a positive cumulative translation adjustment - The total stockholders' deficit worsened to $(45,491) thousand at March 31, 2025, from $(43,888) thousand at December 31, 2024[14] - The change in deficit was mainly due to the net loss of $(2,089) thousand for the quarter[14] Condensed Consolidated Statements of Cash Flows For Q1 2025, the company generated $1.0 million in cash from operating activities, a significant improvement from the $0.6 million used in Q1 2024, ending the period with $2.7 million in cash and cash equivalents Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,018 | $(623) | | Net cash (used in) investing activities | $(31) | $(48) | | Net cash (used in) provided by financing activities | $(1,165) | $(971) | | Cash and cash equivalents at end of period | $2,712 | $881 | - The improvement in operating cash flow was largely driven by a $5.3 million positive change in accounts receivable[16] Notes to Condensed Consolidated Financial Statements Key notes highlight substantial doubt about the company's ability to continue as a going concern due to significant working capital and accumulated deficits, non-compliance with debt covenants, and notable customer and vendor concentrations - Management has identified conditions that raise substantial doubt about the company's ability to continue as a going concern, including a working capital deficit of $55.1 million and an accumulated deficit of $126 million[24][28] - Management's mitigation plans include reducing operating expenses, focusing on profitable product lines, and relying on the continued support of its primary supplier, Blue Star, to whom it owes approximately $56.6 million[28] - The company was not in compliance with certain financial covenants related to its Bank Leumi and Bank Hapoalim debt as of March 31, 2025, which could result in an event of default[42] - For Q1 2025, one vendor accounted for 45% of purchases, and one customer accounted for 11.2% of outstanding receivables[26][27] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported an 8.7% revenue increase to $19.9 million for Q1 2025 and a 45% reduction in operating loss, but the company's financial condition remains precarious with significant deficits despite improved operating cash flow Overview The company's sales increased by 8.7% to $19.9 million in Q1 2025, while the loss from operations significantly improved by $569 thousand to $690 thousand, with basic loss per share remaining flat - Sales for Q1 2025 were $19.9 million, an increase of approximately $1.6 million (8.7%) over Q1 2024[63] - Loss from operations for Q1 2025 was $690 thousand, a decrease of $569 thousand compared to the $1.3 million loss in Q1 2024[64] Liquidity and Capital Resources As of March 31, 2025, the company had $2.7 million in cash but faced a $55 million working capital deficit and a $45.5 million stockholders' deficit, with operations providing $1.0 million in cash - The company had cash of $2.7 million and a working capital deficit of $55 million as of March 31, 2025[65] - Net cash provided by operations was $1.0 million for Q1 2025, a $1.6 million improvement from the cash used in Q1 2024, attributed to higher revenue[66] Results of Operations Revenue for Q1 2025 increased 8.7% to $19.9 million, but gross margin declined due to a higher increase in cost of goods sold, while operating expenses decreased by 7.7% due to cost savings Results of Operations Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | Variation $ | Variation % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $19,903 | $18,317 | $1,586 | 8.66% | | Gross Profit | $5,141 | $5,058 | $83 | 1.64% | | Operating Expenses | $5,831 | $6,317 | $(486) | (7.69)% | | Loss from operations | $(690) | $(1,259) | $569 | (45.19)% | - The increase in revenue was attributed to the acceleration of projects by customers[70] - The decrease in operating expenses was primarily due to management's cost savings plan, which reduced SG&A expenses by 9%[72][73] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the current reporting period - Not Applicable[78] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness in segregation of duties, though no material impact on reporting was identified - The CEO and Principal Accounting Officer concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2025[79] - A material weakness was identified in controls related to segregation of duties, a situation attributed to the small number of professionals in management[84][85] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[88] PART II - OTHER INFORMATION Legal Proceedings The company is actively involved in two legal cases, including a $5.6 million claim for alleged breach of a lease agreement and a $389 thousand claim for unpaid consultant fees - A lawsuit was filed against subsidiary Dangot Computers in Israel by a commercial real estate company, with an initial claim of approximately $5.6 million for an alleged breach of a letter of intent[90] - In March 2025, a terminated consultant filed a lawsuit claiming approximately $389 thousand in unpaid fees and commissions[91] - A case with a former employee over $60 thousand in unpaid commissions was settled in February 2024[89] Risk Factors This section is not applicable for this quarterly report - Not applicable[92] [Unregistered Sales of Equity Securities and Use of Proceeds](index=21&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS.) There were no unregistered sales of equity securities during the period - None[93] Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[94] Mine Safety Disclosures This section is not applicable - Not applicable[95] Other Information There was no other information to report for the period - None[96] Exhibits The report includes standard exhibits such as Sarbanes-Oxley certifications and Inline XBRL data files - Exhibits filed include CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents[102]