10-Q: OMNIQ Corp. Q1 2026 Financials Show Revenue Dip, Increased Operating Expenses

OMNIQ Corp. reported a 3.75% decrease in revenue for Q1 2026 compared to Q1 2025, alongside a significant increase in operating expenses, leading to a wider loss from operations.

Summary

• OMNIQ Corp. reported revenues of $7.7 million for the three months ended March 31, 2026, a decrease of 3.75% from $7.9 million in the same period of 2025.
• Cost of goods sold decreased by 6.40% to $5.4 million in Q1 2026 from $5.8 million in Q1 2025.
• Gross profit increased by 3.30% to $2.26 million in Q1 2026 from $2.18 million in Q1 2025.
• Total operating expenses increased by 34.98% to $3.52 million in Q1 2026 from $2.61 million in Q1 2025, primarily due to higher selling, general, and administrative expenses.
• Loss from operations widened to $1.27 million in Q1 2026 from $0.43 million in Q1 2025.
• Net loss for Q1 2026 was $1.65 million, an improvement from a net loss of $2.09 million in Q1 2025.
• Basic loss per share from continuing operations was $(0.11) for Q1 2026, compared to $(0.19) for Q1 2025.
• The company had cash and cash equivalents of $787,000 as of March 31, 2026, and a working capital deficit of $14.6 million.
• Stockholders' deficit was $14.1 million as of March 31, 2026.
• The company's disclosure controls and procedures and internal control over financial reporting were deemed not effective as of March 31, 2026, with a material weakness identified in segregation of duties.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to declining revenues, increased operating expenses, widening losses from operations, and ongoing going concern risks, despite some improvements in net loss and basic loss per share.

Positives

• Gross profit increased by 3.30% to $2.26 million in Q1 2026 from $2.18 million in Q1 2025.
• Net loss improved to $1.65 million in Q1 2026 from $2.09 million in Q1 2025.
• Basic loss per share from continuing operations improved to $(0.11) in Q1 2026 from $(0.19) in Q1 2025.
• Cash and cash equivalents increased to $787,000 as of March 31, 2026, from $679,000 as of December 31, 2025.
• The company successfully settled many debts at a discount during 2025, reducing short-term liabilities significantly.
• An equity raise in December 2025 resulted in approximately $941,000 in net cash received from investors.

Negatives

• Revenue decreased by 3.75% to $7.7 million in Q1 2026 from $7.9 million in Q1 2025.
• Operating expenses increased by 34.98% to $3.52 million in Q1 2026 from $2.61 million in Q1 2025, driven by higher selling, general, and administrative costs.
• Loss from operations widened significantly to $1.27 million in Q1 2026 from $0.43 million in Q1 2025.
• The company has a working capital deficit of $14.6 million as of March 31, 2026.
• The company has an accumulated deficit of $125.7 million as of March 31, 2026.
• Disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2026, with a material weakness identified in segregation of duties.

Risks

• The company's ability to raise capital when needed and on acceptable terms and conditions.
• The company's ability to manage credit and debt structures from vendors, debt holders, and secured lenders.
• The company's ability to manage the growth of its business through internal growth and acquisitions.
• Competitive pressures in the market.
• The company's 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.
• The company was not in compliance with certain financial covenants related to Bank Leumi and Bank Hapoalim debt as of March 31, 2026, which could result in an event of default.
• A commercial real estate company filed a lawsuit alleging breach of a letter of intent for a lease arrangement, with an initial claim of approximately $5.6 million.
• A consultant who was terminated claims he is owed approximately $389,000 in unpaid fees and commissions.
• Several companies filed third-party and fourth-party claims against Dangot Computers alleging patent infringement.

Future Outlook

The company's strategy involves leveraging management's relationships for investments and focusing on operating companies with a track record of positive cash flows and larger existing revenue bases. They are also evaluating operating expenses to reduce expenditures without negatively impacting current operations, focusing sales efforts on prime customers and profitable product lines, and implementing an aggressive debt settlement plan. The company is also finalizing definitive agreements for the divestiture of its CodeBlocks business.

Management Comments

• Management considers the conditions outlined (balancing operational cash needs with product additions, timely and cost-effective product development, working capital deficit, accumulated deficit, and multiple years of losses) as the most significant factors raising substantial doubt about the Company's ability to continue as a going concern within one year.
• Management is evaluating operating expenses and developing a plan to reduce expenditures without negatively impacting current operations.
• Sales efforts are focused on the most profitable product lines and prime customers.
• The Company has implemented an aggressive debt settlement plan with its vendors and debt holders to clean up the Balance Sheet presentation.
• The Company believes that it has meritorious defenses to the commercial real estate lawsuit and intends to vigorously defend itself.
• The Company believes it has multiple defense and cross claims against the former consultant in the consultant lawsuit and plans to vigorously defend the suit.

Industry Context

StockSavvy.ai notes that OMNIQ Corp. operates in the machine vision and image processing solutions market, providing hardware, software, and automated management services for applications in supply chain management, homeland security, public safety, and traffic management. This sector is characterized by rapid technological advancements and increasing demand for automation and security solutions. The company's focus on AI technology positions it within a growing segment of the technology industry.

Corporate Governance

Legal Proceedings

• 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 initial claim is NIS 21 million (approximately US $5.6 million). The company believes it has meritorious defenses and its exposure is significantly lower than the original claim.
• In March 2025, the Company was named a defendant in a case involving a consultant who claims he is owed approximately $389,000 in unpaid fees and commissions. The Company believes it has multiple defenses and cross claims and plans to vigorously defend the suit.
• During 2025, several companies filed third-party and fourth-party claims against Dangot Computers alleging patent infringement. The likelihood of these claims cannot be assessed at this preliminary stage.

Related Party Transactions

• Advances to OMNIQ from the Buyer of the Quest Solution division (majority controlled by the CEO) were $5,624,040 as of March 31, 2026, and $3,767,032 as of December 31, 2025. These are non-interest bearing with no predefined repayment term.
• A Promissory Note with a balance of $9.4 million at March 31, 2026, and $9.6 million at December 31, 2025, bears interest at 5% per annum, is amortized over ten years, and provides for a balloon payment after the third year. Due to the CEO's relationship with the Note Holder, this is deemed a related party transaction.
• The sale of the Quest Solution division to Summit Junction Holdings LLC was deemed a related party transaction due to an entity affiliated with the CEO, Shai Lustgarten, being a principal member of the Buyer. The resulting $34 million gain was recorded directly to Additional Paid-in Capital as a capital contribution.

Stakeholder Impact

• Shareholders: The widening loss from operations and ongoing going concern risks may negatively impact shareholder value. The equity raise in December 2025 provided some liquidity but also diluted existing shareholders.
• Creditors/Debt Holders: The company's non-compliance with certain debt covenants poses a risk of default, which could impact creditors.
• Vendors: The company is implementing an aggressive debt settlement plan with vendors, which may lead to renegotiated terms or potential disputes.
• Employees: The increase in selling, general, and administrative expenses, specifically salaries, suggests potential investment in personnel, but the overall financial performance and going concern risks could create uncertainty.

Next Steps

• Management is developing a plan to reduce operating expenses without negatively impacting current operations.
• The company is continuing to finalize the terms of the divestiture of its CodeBlocks business, with definitive agreements expected to be executed in the near term.
• The company is in negotiations with banks regarding extensions on bank covenants.
• The company is required to comply with new financial covenants set forth in a new agreement signed with Bank Hapoalim, commencing with the 2026 financial statements.

Key Dates

Recommendation

While the company has improved its net loss and basic loss per share, the significant increase in operating expenses, widening loss from operations, and persistent going concern risks, including covenant non-compliance, outweigh the positives. The company's ability to execute its cost-reduction plans and secure future financing is critical. Therefore, a 'hold' recommendation is appropriate pending further clarity on operational improvements and financial stability.

Keywords

OMNIQ Corp, 10-Q, Quarterly Report, Financial Statements, Revenue, Net Loss, Operating Expenses, Working Capital, Stockholders Equity, Going Concern, Disclosure Controls, Internal Controls, Legal Proceedings, Debt Covenants