Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Stockholders' Equity

NOTE 14 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

Series A

As of December 31, 2020 and 2019, there were 1,000,000 Series A preferred shares authorized and zero Series A preferred shares outstanding. The board of directors had previously set the voting rights for the preferred stock at 1 share of preferred to 13 common shares.

Series B

As of December 31, 2020 and 2019, there was one (1) preferred share authorized and zero preferred shares outstanding.

Series C

As of December 31, 2020 and 2019, there were 5,000,000 Series C Preferred Shares (“Series C”) authorized with 2,145,030 and 4,828,530 issued and outstanding, respectively. The Series C shares have preferential rights above common shares and the Series B Preferred Shares and is entitled to receive a quarterly dividend at a rate of $0.06 per share per annum and have a liquidation preference of $1 per share. Series C shares outstanding are convertible into common stock at the rate of 20 preferred shares to one share of common stock. As of December 31, 2020 and 2019, the accrued dividends on the Series C Preferred Stock was $253 thousand and $344 thousand, respectively.

In June 2020, certain holders of Series C Shares elected to convert $2.7 million or 2,683,500 Series C shares and $283 thousand in accrued dividends in exchange for 190,365 OMNIQ common stock shares.

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

COMMON STOCK

In August 2020, 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, one million (1,000,000) shares of the Company’s common stock, par value $0.001 (the “Shares”), were set aside and reserved for issuance. The Plan approved by our stockholders at the September 2020, shareholders’ meeting. For the year ending December 31, 2020, we issued 336,146 shares ( $1.6 million) to consultants and advisors for services rendered.

In December 2015, our Board of Directors approved the OMNIQ. Employee Stock Purchase Plan (the “ESPP”). For the years ending December 31, 2020 and 2019, employees purchased 302 ($1 thousand) shares and 287 ($1 thousand) shares of commons stock.

For the years ending December 31, 2020 and 2019, 216,750 and zero, respectively, in stock options and stock warrants were exercised in exchange for 90,691 shares of OMNIQ common stock.

In April 2020 and in conjunction with the Eyepax acquisition, we issued the former owner 80,000 share of OMNIQ common stock.

In September 2020 and pursuant to the 2020 Equity Incentive Plan, we granted options to purchase an aggregate of 745,000 shares of our common stock to certain of our employees, officers and directors. Included in the total shares granted are options to purchase 230,000 shares of its common stock to Mr. Shai Lustgarten, our Chief Executive Officer, options to purchase 40,000 shares of its common stock to Mr. Neev Nissenson, our Chief Financial Officer, options to purchase 150,000 shares of its common stock to Mr. Carlos J. Nissensohn, a consultant and principal stockholder, and options to purchase 10,000 shares of its common stock to our Directors Andy MacMillan and Yaron Shalem, respectively. The remaining 305,000 granted options are for other employees and consultants. The exercise price of all of the options granted was $4.40 per share, which was the closing price of the Company’s common stock on September 29, 2020, the day prior to the grant, except for the options granted to Shai Lustgarten and Carlos J. Nissensohn, which have an exercise price of $4.84 per share. The options granted to Shai Lustgarten and Carlos J. Nissensohn have a term of five (5) years and the balance of the options have a term of ten (10) years.

Effective November 11, 2019, we implemented a one-for-20 reverse stock split of the Company’s common stock. The par value of common stock and the number of authorized shares were not adjusted as a result of the reverse stock split. All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

In September 2019, and in accordance with the terms of the Convertible Promissory Note, Walefar and Campbeltown each exercised the right to convert $75 thousand in unpaid principal balance into fully paid and non-assessable shares of the Company’s common stock at a conversion price of $0.236. Accordingly, we issued 317,796 shares to each of Walefar and Campbeltown.

In September 2019, we entered into a letter agreement with Shai Lustgarten, the Company’s Chief Executive Officer, pursuant to which we and Mr. Lustgarten agreed to extend the term of Mr. Lustgarten’s employment agreement for an additional two (2) years. As consideration and in light of the Company’s achievements under the leadership of Mr. Lustgarten, the Company, pursuant to its 2018 Equity Incentive Plan, issued to Mr. Lustgarten 50,000 shares of the OMNIQ common stock valued at $250 thousand.

In September 2019, we entered into a letter agreement with Mr. Carlos J. Nissensohn and/or an entity under his control, a consultant to the Company and principal stockholder, pursuant to which they agreed to extend the term of Mr. Nissensohn’s and/or an entity under his control’s consulting agreement for an additional two (2) years. As consideration and in light of Mr. Nissensohn’s and/or an entity under his control’s past consulting services which we believe were essential to its recent achievements, we, pursuant to the 2018 Equity Incentive Plan, issued to Mr. Nissensohn and/or an entity under his control 27,500 shares of the Company’s common stock, valued at $138 thousand.

In April 2019, we entered into a form of Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited investors (the “Purchasers”). Pursuant to the Securities Purchase Agreement, on April 9, 2019 (the “Closing Date”), the Company sold an aggregate, with the Conversions included, of $5.0 million of units (the “Units”) resulting in gross proceeds of $5.0 million, before deducting placement agent fees and offering expenses (the “Offering”). The individual Unit purchase price was $6.00. Each Unit is comprised of one share of the Company’s common stock, $0.001 par value per share (the “Common Stock”), and a warrant to purchase one share of Common Stock, and, as a result of the Offering, the Company issued 833,333 shares of Common Stock (the “Shares”) and warrants (the “Warrants”) to purchase 833,333 shares of Common Stock (the “Warrant Shares”) at an exercise price equal to $7.00 per Warrant Share, which Warrants are exercisable for a period of five and one-half years from the issuance date. Both Shai Lustgarten, the Company’s Chief Executive Officer, and Carlos J. Nissensohn, a consultant to and principal stockholder of the Company, participated in the Offering by converting $200 thousand each of unpaid principal owed to them from the HTS acquisition (the “Conversions”), by the Company in exchange for Shares and Warrants on the same terms as all other Purchasers. With the Conversions included, the Offering resulted in gross proceeds of $5.0 million. As a result of the Conversions, a principal amount of $150 thousand is owed to each Walefar and Campbeltown respectively under the note issued to them as partial consideration in the sale of HTS Image Processing to the Company on October 5, 2018.

Warrants and Stock Options

In connection with the April 2019 Securities Purchase Agreement previously described, we issued warrants to purchase 891,667 shares of our common stock at an exercise price equal to $7.00 per Warrant Share, which warrants are exercisable for a period of five and one-half years from the issuance date. The warrants were valued at $2.9 million. Also during 2019, we issued options to purchase 128,000 valued at $564 thousand.

These options and warrants were valued at the grant date using the Black-Scholes valuation methodology. The Company determines the assumptions used in the valuation of warrants and option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options and warrants granted throughout the year. The valuation assumptions used to determine the fair value of each option/warrants award on the date of grant were: expected stock price volatility 156.0% - 157.0%; expected term in years 4.0-5.5; and risk-free interest rate 1.40% - 2.31%.

The following table summarizes information about warrants granted during the years ended December 31,:

	2020				2019
	Number of warrants		Weighted Average Exercise Price		Number of warrants		Weighted Average Exercise Price
Balance, beginning of year		1,166,667	$	6.42		275,000	$	4.55
Warrants granted		375,000		-		891,667		7.00
Warrants expired		25,000		-		-		-
Warrants cancelled, forfeited		-		-		-		-
Warrants exercised		150,000		-		-		-
Balance, end of year		1,366,667	$	7.19		1,166,667	$	6.42
Exercisable warrants		1,200,001	$	7.14		1,166,667	$	6.42

Outstanding warrants as of December 31, 2020 are as follows:

		Weighted Average				Weighted				Weighted
Range of		residual life				Average				Average
Exercise		span		Outstanding		Exercise		Exercisable		Exercise
Prices		(in years)		Warrants		Price		Warrants		Price
	2.20		0.59		75,000	$	2.20		75,000	$	2.20
	7.00		3.77		891,667		7.00		891,667		7.00
	7.50		5.68		250,000		7.50		83,334		7.50
	8.00		1.16		10,000		8.00		10,000		8.00
	10.00		2.22		125,000		10.00		125,000		10.00
	14.00		0.16		15,000		14.00		15,000		14.00
	2.20 to 14.00		3.93		1,366,667	$	8.12		1,200,001	$	8.12

Warrants outstanding have the following expiry date and exercise prices as of the year ended December 31, 2020:

	Exercise
Expiry Date	Prices		2020		2019
June 26, 2020	$	5.60		-		10,000
October 10, 2020		12.00		-		15,000
December 30, 2020		4.00		-		150,000
February 02, 2021		14.00		15,000		-
August 02, 2021		2.20		75,000		75,000
October 10, 2021		10.00		25,000		25,000
February 27, 2022		8.00		10,000		-
May 18, 2023		10.00		50,000		-
October 14, 2023		10.00		50,000		-
October 06, 2024		7.00		891,667		891,667
September 01, 2025		7.50		83,334		-
June 04, 2026		7.50		83,333		-
December 04, 2027		7.50		83,333		-
	$	8.37		1,366,667		1,166,667

We have a stock option plan whereby the Board of Directors, may grant to directors, officers, employees, or consultants of the Company options to acquire common shares. The Board of Directors of the Company has the authority to determine the terms, limits, restrictions and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The plan was adopted by the Company’s Board of Directors on November 17, 2014 in order to provide an inducement and serve as a long-term incentive program. The maximum number of common shares that may be reserved for issuance was set at 500,000.

The option exercise price is established by the Board of Directors and may not be lower than the market price of the common shares at the time of grant. The options may be exercised during the option period determined by the Board of Directors, which may vary, but will not exceed ten years from the date of the grant. There are 500,000 of the Company’s common shares which may be issued pursuant to the exercise of share options granted under the Plan..

Stock Options - The following table summarizes information about stock options granted during the years ended December 31, 2020 and 2019:

	2020				2019
	Number of stock options		Weighted Average Exercise Price		Number of stock options		Weighted Average Exercise Price
Balance, beginning of year		1,133,550	$	4.00		1,006,050	$	3.80
Stock options granted		775,000		-		127,500		5.00
Stock options expired		-		-		-		-
Stock options cancelled, forfeited		30,250		-		-		-
Stock options exercised		66,750		-		-		-
Balance, end of year		1,811,550		4.32		1,133,550		4.00
Exercisable stock options		999,988	$	4.05		952,425	$	3.94

Outstanding stock options as of December 31, 2020, are as follows:

		Weighted
		Average				Weighted
Range of		residual life				Average				Weighted
Exercise		span		Outstanding		Exercise		Exercisable		Average
Prices		(in years)		Stock Options		Price		Stock Options		Exercise Price
	1.70		1.13		114,050	$	1.70		114,050	$	1.70
	2.20		0.59		175,000		2.20		175,000		2.20
	2.40		2.18		272,000		2.40		272,000		2.40
	4.20		4.30		10,000		4.20		5,000		4.20
	4.40		8.39		454,250		4.40		88,000		4.40
	4.84		9.75		380,000		4.84		-		4.84
	5.00		2.52		147,500		5.00		87,188		5.00
	5.40		2.92		133,750		5.40		133,750		5.40
	10.00		3.89		125,000		10.00		125,000		10.00
	1.7 to 10		5.32		1,811,550	$	4.05		999,988	$	5.32

Stock options outstanding at the end of the year have the following expiry date and exercise prices:

	Exercise
Expiry Date	Prices		31-Dec-20		31-Dec-19
August 02, 2021	$	2.20		175,000		175,000
February 17, 2022		1.50		38,017		38,017
February 17, 2022		1.80		76,033		76,033
February 28, 2023		5.00		20,000		-
March 05, 2023		2.40		272,000		340,000
July 31, 2023		5.00		127,500		127,500
October 31, 2023		4.40		89,250		108,250
November 30, 2023		5.40		133,750		143,750
November 20, 2024		10.00		125,000		125,000
April 20, 2025		4.20		10,000		-
September 30, 2030		4.40		365,000		-
September 30, 2030		4.84		380,000		-
	$	4.26		1,811,550		1,133,550

We recorded stock compensation expense relating to the vesting of stock options and warrants as follows for the years ended December 31, 2020 and 2019;

	2020		2019
In thousands
Stock compensation	$	-	$	388
Stock Option vesting		709		879
Total	$	709	$	1,267