Company: OMQS
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001813
Chunk: 12

Company: OMNIQ Corp.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 12
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 of satisfying
the related performance obligation(s) under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied
the related performance obligation.

15

We
have four main revenue streams: (1) Hardware sales, (2) Hardware installation/configuration, (3) Hardware service contracts, and (4)
Third-party software sales. For all these revenue streams, our performance obligations are satisfied at a point in time, and therefore,
revenue is recognized at the point in time when a customer takes control of the good or asset created by the service. Factors that may
indicate transfer of control are when we have the right to receive payment for the good or service, when the legal title of the asset
has been transferred, physical possession of the asset has been transferred, the customer obtains the significant risks and rewards of
ownership of the asset, and the customer accepts the asset. For some customers, control is transferred when the customer, or the customer’s
courier, picks up the hardware from our warehouse. For other customers, control is transferred upon delivery. For hardware sales which
also include installation and/or configuration as a single performance obligation, control is transferred only when the hardware is delivered
and installed/configured. For hardware service contracts and for third-party software sales, the Company acts as the agent in the transaction,
and thus recognizes revenue on a net basis at a point in time when the transaction has been facilitated.

We
leverage drop-ship shipments with many of our partners and suppliers to deliver hardware to our customers without having to physically
hold the inventory at our warehouses, thereby increasing efficiency and reducing costs. We recognize revenue for drop-ship arrangements
on a gross basis as the principal in the transaction when the product is received by the customer because we control the product prior
to transfer to the customer. We also assume primary responsibility for the fulfillment in the arrangement, we assume inventory risk if
something were to happen to the hardware during shipping, we set the price of the product charged to the customer, we assume credit risk
for nonpayment by our customer, and we work closely with customers to determine their hardware specifications.

Management
reviews historical returns on at least an annual basis to determine the need for an allowance for sales returns. Historically, sales
returns have been extremely limited, with the effect on the financial statements immaterial. Sales returns during any particular year
are so small and so infrequent that management determined that any material reserve against sales returns would likely not be appropriate.

Definite-lived