UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM
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(Mark one)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) | (Zip Code) | |
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| (Registrant’s Telephone Number, Including Area Code) | ||
(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 | Trading Symbol(s) |
Name of each exchange on which Registered |
| The Capital Market | ||
| The |
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 | o | Accelerated filer | o | |
| x | 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. o
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock outstanding at May 6, 2025.
| 2 |
| PART I - FINANCIAL INFORMATION | ||
| ITEM 1. | Financial Statements | 4 |
| Consolidated Balance Sheets (Unaudited) | 4 | |
| Consolidated Statements of Operations (Unaudited) | 6 | |
| Consolidated Statements of Comprehensive Loss (Unaudited) | 7 | |
| Consolidated Statements of Cash Flows (Unaudited) | 8 | |
| Consolidated Statements of Stockholders' Equity (Unaudited) | 10 | |
| Notes to Consolidated Financial Statements (Unaudited) | 11 | |
| ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 25 |
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 30 |
| ITEM 4. | Controls and Procedures | 30 |
| PART II - OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 31 |
| ITEM 1A. | Risk Factors | 31 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 31 |
| ITEM 3. | Defaults Upon Senior Securities | 31 |
| ITEM 4. | Mine Safety Disclosures | 31 |
| ITEM 5. | Other Information | 31 |
| ITEM 6. | Exhibits | 31 |
| SIGNATURES | 32 | |
| 3 |
PART I - FINANCIAL STATEMENTS
ITEM 1.
VerifyMe, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for credit loss reserve, $ | ||||||||
| Unbilled revenue | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| PROPERTY AND EQUIPMENT, NET | $ | $ | ||||||
| RIGHT OF USE ASSET | ||||||||
| INTANGIBLE ASSETS, NET | ||||||||
| GOODWILL | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Term note, current | $ | $ | ||||||
| Accounts payable | ||||||||
| Other accrued expense | ||||||||
| Lease liability- current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term lease liability | ||||||||
| Term note | ||||||||
| Convertible note – related party | ||||||||
| Convertible note | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Series A Convertible Preferred Stock, $ par value, shares authorized; shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series B Convertible Preferred Stock, $ par value; shares authorized; shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Common stock, $ par value; shares authorized; and shares issued, and shares outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid in capital | ||||||||
| 4 |
| Treasury stock as cost; and shares at March 31, 2025 and December 31, 2024, respectively | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
VerifyMe, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
| Three Months Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| NET REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Segment management and Technology(a) | ||||||||
| General and administrative (a) | ||||||||
| Research and development | ||||||||
| Sales and marketing (a) | ||||||||
| Total Operating expenses | ||||||||
| LOSS BEFORE OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income(expense) net | ( | ) | ||||||
| Change in fair value of contingent consideration | ||||||||
| TOTAL OTHER INCOME, NET | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| LOSS PER SHARE | ||||||||
| BASIC | ( | ) | ( | ) | ||||
| DILUTED | ( | ) | ( | ) | ||||
| WEIGHTED AVERAGE COMMON SHARE OUTSTANDING | ||||||||
| BASIC | ||||||||
| DILUTED | ||||||||
| (a) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
VerifyMe, Inc.
Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
| Three months ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Change in fair value of interest rate, Swap | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
VerifyMe, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Three months ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Allowance for doubtful accounts | ||||||||
| Stock based compensation | ||||||||
| Change in fair value of contingent consideration | ( | ) | ||||||
| Fair value of restricted stock awards and restricted stock units issued in exchange for services | ||||||||
| Impairments | ||||||||
| Amortization and depreciation | ||||||||
| Gain on partial lease termination | ( | ) | ||||||
| Unrealized loss on foreign currency transactions | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Unbilled revenue | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable, other accrued expenses and net change in operating leases | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of patents | ( | ) | ||||||
| Purchase of office equipment | ( | ) | ||||||
| Capitalized software costs | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Warrants Exercise | ||||||||
| Proceeds from SPP Plan | ||||||||
| Tax withholding payments for employee stock-based compensation in exchange for shares surrendered | ( | ) | ( | ) | ||||
| Increase in treasury shares (share repurchase program) | ( | ) | ||||||
| Repayment of debt and line of credit | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| NET INCREASE(DECREASE) CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- END OF PERIOD | $ | $ | ||||||
| 8 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Lease modification | $ | $ | ||||||
| Conversion of convertible note and accrued interest | $ | $ | ||||||
| Change in fair value of interest rate, swap | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 9 |
VerifyMe, Inc.
Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands, except share data)
| Series A | Series B | |||||||||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Stock | |||||||||||||||||||||||||||||||||||||||||||||
| Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Stock Purchase Plan | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of Common Stock | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | |||||||||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Stock | |||||||||||||||||||||||||||||||||||||||||||||
| Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Convertible note | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units, net of shares withheld for employee tax | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 10 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements (unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
VerifyMe, Inc. (“VerifyMe,” “we,” “us,”
“our,” or the “Company”) was incorporated in the State of
The Company is a logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. The Company operates a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global, LLC (“PeriShip Global”) and accounts for nearly all VerifyMe revenue and an Authentication segment. Through our Precision Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported by a service center. Through our Authentication segment our technologies enable brand owners to deter counterfeit activities. Further information regarding our business segments is discussed below. The Company’s activities are subject to significant risks and uncertainties. See the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report.
Reclassifications
Certain amounts presented for the three months ended March 31, 2024, reflect reclassifications made to conform to the presentation in our current reporting period. These reclassifications had no effect on the previously reported net loss.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements include the accounts of VerifyMe and its wholly owned subsidiary PeriShip Global. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025. The accompanying Interim Statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025, or for any future interim periods.
Segment Reporting
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method by which to allocate resources and assess performance. The Company has two reportable segments, namely, (i) Precision Logistics and (ii) Authentication. See Note 11 Segment Reporting, for further discussion of the Company’s segment reporting structure.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on their financial statement disclosures.
| 11 |
Notes to the Consolidated Financial Statements (unaudited)
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220). This standard requires disclosure of specific information about costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the potential effect that the updated standard will have on their financial statement disclosures.
Fair Value of Financial Instruments
The Company’s financial instruments consist of accounts receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, equity investments, and long-term derivatives. The carrying value of accounts receivable, unbilled revenue, accounts payable and accrued expenses approximate their fair value because of their short maturities. The Company believes the carrying amount of its notes payable approximates fair value based on rates and other terms currently available to the Company for similar debt instruments.
The Company follows FASB Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, and applies it to all assets and liabilities that are being measured and reported on a fair value basis. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
The level in the fair value within which a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents the Company’s financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of March 31, 2025 and December 31, 2024.
Amounts in Thousands ('000)
| Derivative Asset | ||||
| (Level 2) | ||||
| Balance as of December 31, 2024 | ||||
| Termination of SWAP, recognized in other comprehensive loss | ( | ) | ||
| Balance at March 31, 2025 | $ | |||
Revenue Recognition
The Company accounts for revenues according to ASC Topic 606, Revenue from Contracts with Customers which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.
The Company applies the following five steps, separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements.
| · | identify the contract with a customer; |
| · | identify the performance obligations in the contract; |
| · | determine the transaction price; |
| · | allocate the transaction price to performance obligations in the contract; and |
| · | recognize revenue as the performance obligation is satisfied. |
The Company generally considers completion of an agreement, or Statement of Work (“SOW”) and/or purchase order as a customer contract, provided collection is considered probable. For more detailed information about reportable segments, see Note 11 – Segment reporting.
| 12 |
Notes to the Consolidated Financial Statements (unaudited)
Precision Logistics
Our Precision Logistics segment consists of two service lines, Proactive and Premium. Under our Proactive service line, clients pay us directly for carrier service coupled with our proactive logistics service. Terms typically range 7 days and no longer than 30 days. The Company has determined it is the principal and recognizes shipment fees in gross revenue. Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics services. This service includes customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution. Payment terms are typically 30 - 45 days.
Under both service lines in our Precision Logistics segment, our performance obligation is met, and revenue is recognized when the packages are delivered. The transaction fees consist of fixed consideration made up of amounts contractually billed to the customer. There are no variable considerations in the transaction fee, in either service line.
Authentication
Our Authentication segment primarily consists of anti-counterfeit and brand protection. Terms typically range between 30 and 60 days. Our performance obligation is met, and revenue is recognized when our products are shipped or delivered depending on the specific agreement with the customer. The transaction fee is made up of fixed consideration based on the related purchase order or agreement.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, Intangibles-Goodwill and Other, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test. The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.
The Company follows ASC Topic 260, Earnings Per Share, when reporting earnings per share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.
For the three months ended March 31, 2025, and 2024, there were shares potentially issuable, that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the periods presented. For the three months ended March 31, 2025, there were approximately anti-dilutive shares consisting of unvested performance restricted stock units, restricted stock units and restricted stock awards, shares issuable upon exercise of stock options, shares issuable upon exercise of warrants, shares issuable upon conversion of convertible debt, and shares issuable upon conversion of preferred stock. For the three months ended March 31, 2024, there were approximately anti-dilutive shares consisting of unvested performance restricted stock units, 785,000 restricted stock units, restricted stock awards and options under the stock purchase plan, shares issuable upon exercise of stock options, shares issuable upon exercise of warrants, shares issuable upon conversion of convertible debt, shares issuable in connection with earnout earned for the Trust Codes Acquisition, and shares issuable upon conversion of preferred stock.
We account for stock-based compensation under the provisions of ASC Topic 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes model. The assumptions used in the Black-Scholes option pricing model include risk-free interest rates, expected volatility and expected life of the stock options. Changes in these assumptions can materially affect estimates of fair value stock-based compensation, and the compensation expense recorded in future periods. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line method. We recognize forfeitures as they occur with a reduction in compensation expense in the period of forfeiture. For performance restricted stock units (“RSU”) with stock price appreciation targets (see Note 6 – Stock Options, Restricted Stock and Warrants), we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the RSU’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal based on actual achievement during the period.
| 13 |
Notes to the Consolidated Financial Statements (unaudited)
We account for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.
All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if we had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured, and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed.
NOTE 2 – REVENUE
Revenue by Category
The following series of tables present our revenue disaggregated by various categories (dollars in thousands).
| Precision Logistics | Authentication | Consolidated | ||||||||||||||||||||||
| Revenue | Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Proactive services | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Premium services | ||||||||||||||||||||||||
| Brand protection services | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Contract Balances
The timing of revenue recognition, billings and cash collections results in unbilled revenue (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheets. Amounts charged to our clients become billable according to the contract terms, which usually consider the delivery completion. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the three-month period ended March 31, 2025, were not materially impacted by any other factors.
Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. As of March 31, 2025, we did not have any capitalized sales commissions.
For all periods presented, contract liabilities were not significant.
The following table provides information about contract assets from contracts with customers:
| Contract Asset | ||||||||
| March 31, | ||||||||
| In Thousands | 2025 | 2024 | ||||||
| Beginning balance, January 1 | $ | $ | ||||||
| Contract asset additions | ||||||||
| Reclassification to accounts receivable, billed to customers | ( | ) | ( | ) | ||||
| Ending balance, March 31 (1) | $ | $ | ||||||
______________
| (1) |
| 14 |
Notes to the Consolidated Financial Statements (unaudited)
NOTE 3 – BUSINESS COMBINATIONS
On December 8, 2024, the Company sold Trust Codes Global pursuant
to a Share Sale Agreement with a related party, Paul Ryan, former Executive Vice President of the Authentication Segment and employee
of Trust Codes Global Limited. This divestiture did not qualify as a discontinued operation. The purchase price per the agreement was
$1 NZD. We recognized a loss of $
NOTE 4 – INTANGIBLE ASSETS AND GOODWILL
Goodwill
Goodwill represents costs in excess of values assigned to the underlying net assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill is deemed to have an indefinite life and is not amortized but is tested for impairment annually, and at any time when events suggest an impairment more likely than not has occurred. We test goodwill at the reporting unit level.
ASC Topic 350, “Intangibles - Goodwill and Other” (“ASC Topic 350”), permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. Under ASC Topic 350, an entity is not required to perform a quantitative goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.
Each of our two reportable segments represents an operating segment under ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, “Intangibles - Goodwill and Other”. We determined that we have two reporting units for purposes of goodwill impairment testing, which represent our two reportable business segments, as discussed below.
Changes in the carrying amount of goodwill by reportable business segment for the three months ended March 31, 2025, were as follows (in thousands):
| Authentication | Precision Logistics | Total | ||||||||||
| Net book value at | ||||||||||||
| January 1, 2025 | $ | $ | $ | |||||||||
| 2025 Activity | ||||||||||||
| Net book value at | ||||||||||||
| March 31, 2025 | $ | $ | $ | |||||||||
| 15 |
Notes to the Consolidated Financial Statements (unaudited)
Intangible Assets Subject to Amortization
Our intangible assets include amounts recognized in connection with patents and trademarks, capitalized software and acquisitions, including customer relationships, tradenames, developed technology and non-compete agreements. Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset. Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets. Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. Except for goodwill, we do not have any intangible assets with indefinite useful lives.
Intangible assets with finite lives are subject to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as follows (in thousands):
| March 31, 2025 | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Useful Life (Years) | ||||||||||||
| Patents and Trademarks | $ | $ | ( | ) | $ | |||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Developed Technology | ( | ) | ||||||||||||||
| Internally Used Software | ( | ) | ||||||||||||||
| Non-Compete Agreement | ( | ) | ||||||||||||||
| Deferred Implementation | ( | ) | ||||||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||||||
| December 31, 2024 | ||||||||||||||||
| Patents and Trademarks | $ | $ | ( | ) | $ | |||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Developed Technology | ( | ) | ||||||||||||||
| Internally Used Software | ( | ) | ||||||||||||||
| Non-Compete Agreement | ( | ) | ||||||||||||||
| Deferred Implementation | ( | ) | ||||||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||||||
Amortization expense for intangible assets was $
Patents and Trademarks
As of March 31, 2025, our current patent and trademark portfolios consist of seven granted U.S. patents and one granted European patents, two pending foreign patent applications and several foreign trademarks.
The Company expects to record amortization expense of intangible assets over the next 5 years and thereafter as follows (in thousands):
| Fiscal Year ending December 31, | ||||
| 2025 (nine months remaining) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 5 – STOCKHOLDERS’ EQUITY
The Company expensed $
| 16 |
Notes to the Consolidated Financial Statements (unaudited)
The Company expensed $
On March 31, 2025, the Company issued shares of restricted common stock, vesting immediately with a value of $ thousand, for consulting services.
On January 2, 2025, the Company issued shares of common stock, of which were issued from treasury, upon vesting of restricted stock units, net of shares withheld for taxes related to stock grants on July 20, 2023 and July 1, 2024.
On August 25, 2023, the
Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the
aggregate principal amount of $
Non-Qualified Stock Purchase Plan
On June 10, 2021, the stockholders of the Company approved a
non-qualified stock purchase plan (the “2021 Plan”). The 2021 Plan provides eligible participants, including employees, directors
and consultants of the Company, the opportunity to purchase shares of the Company’s common stock thereby increasing their interest
in the Company’s continued success. The maximum number of common stock reserved and available for issuance under the 2021 Plan is
500,000 shares. The purchase price of shares of common stock acquired pursuant to the exercise of an option will be the lesser of 85%
of the fair market value of a share (a) on the enrollment date, and (b) on the exercise date. The 2021 Plan is not intended to qualify
as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). The Company
applied ASC Topic 718, Compensation-Stock Compensation and estimated the fair value using the Black-Scholes model, as the 2021 Plan is
considered compensatory. In relation to the 2021 Plan the Company expensed $ thousand and $ thousand for the three months ended March
31, 2025 and March 31, 2024, respectively. During the three months ended March 31, 2025 and 2024, the Company received $
Shares Held in Treasury
As of March 31, 2025, and December 31, 2024, the Company had
and shares, respectively, held in treasury with a value of approximately $
On February 29, 2024, seven participants exercised their option
under the Company’s non-qualified stock purchase plan, and as a result,
Shares Repurchase Program
In December 2023, the Company’s Board of Directors approved a share repurchase program to allow the Company to spend up to $ million to repurchase shares of its common stock so long as the price does not exceed $1.00 until December 14, 2024. On November 26, 2024, the Company approved an extension of the $ million share repurchase program to repurchase shares of the Company’s common stock through December 31, 2025. The share repurchase program may be modified, suspended or discontinued at the discretion of the Board at any time. The Company did not repurchase any shares during the three months ended March 31, 2025.
On November 14, 2017, the Executive Committee of the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”) which covered the potential issuance of shares of common stock. The 2017 Plan provided that directors, officers, employees, and consultants of the Company were eligible to receive equity incentives under the 2017 Plan at the discretion of the Board or the Board’s Compensation Committee.
On August 10, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and on September 30, 2020, the Company’s stockholders approved the 2020 Plan, which authorizes the potential issuance of up to shares of common stock. Upon effectiveness of the 2020 Plan the 2017 Plan was terminated. Shares of common stock underlying existing awards under the 2017 Plan may become available for issuance pursuant to the terms of the 2020 Plan under certain circumstances. Employees and non-employee directors of the Company or its affiliates, and other individuals who perform services for the Company or any of its affiliates, are eligible to receive awards under the 2020 Plan at the discretion of the Board of Directors or the Board’s Compensation Committee.
| 17 |
Notes to the Consolidated Financial Statements (unaudited)
On March 28, 2022, the Company’s Board of Directors adopted the First Amendment to the 2020 Plan and on June 9, 2022, the Company’s stockholders approved the First Amendment to the 2020 Plan, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 9, 2023. On April 17, 2023, the Company’s Board of Directors adopted the Second Amendment to the 2020 Plan and on June 6, 2023, the Company’s stockholders approved the Second Amendment to the 2020 Plan, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 6, 2033, and increased the annual cap on director compensation by $50 thousand. On March 18, 2024, the Company’s Board of Directors adopted the Third Amendment to the 2020 Plan, which on June 4, 2024, was approved by the Company’s stockholders, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 4, 2034.
The 2020 Plan, as amended, is administered by the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.
The aggregate fair market value (determined at the time of the grant) of stock with respect to which incentive stock options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its affiliates) shall not exceed $100 thousand, and the options in excess of $100 thousand shall be deemed to be non-qualified stock options, including prices, duration, transferability and limitations on exercise. The maximum number of shares of common stock that may be issued under the 2020 Plan pursuant to incentive stock options may not exceed, in the aggregate, .
The Company has issued non-qualified stock options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgements.
Stock Options
The following table summarizes the activities for the Company’s stock options as of March 31, 2025:
| Options Outstanding | ||||||||||||||||
| Weighted - | ||||||||||||||||
| Average | ||||||||||||||||
| Remaining | Aggregate | |||||||||||||||
| Weighted- | Contractual | Intrinsic | ||||||||||||||
| Number of | Average | Term | Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands)(1) | |||||||||||||
| Balance as of December 31, 2024 | $ | $ | - | |||||||||||||
| Granted | ||||||||||||||||
| Forfeited/Cancelled/Expired | ( | ) | ||||||||||||||
| Balance as of March 31, 2025 | $ | $ | - | |||||||||||||
| Exercisable as of March 31, 2025 | $ | $ | ||||||||||||||
| (1) |
| 18 |
Notes to the Consolidated Financial Statements (unaudited)
As of March 31, 2025, the Company had no unvested stock options.
During the three months ended March 31, 2025, and 2024, the
Company expensed $
As of March 31, 2025, there was $
Restricted Stock Awards and Restricted Stock Units
The following table summarizes the unvested restricted stock awards as of March 31, 2025:
| Weighted - | ||||||||
| Average | ||||||||
| Number of | Grant | |||||||
| Award Shares | Date Fair Value | |||||||
| Unvested at December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Balance at March 31, 2025 | $ | |||||||
As of March 31, 2025, total unrecognized share-based compensation
cost related to unvested restricted stock awards is $
The following table summarizes the unvested restricted stock units as of March 31, 2025:
| Weighted - | ||||||||
| Average | ||||||||
| Number of | Grant | |||||||
| Unit Shares | Date Fair Value | |||||||
| Unvested at December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Balance at March 31, 2025 | $ | |||||||
As of March 31, 2025, total unrecognized share-based compensation cost related to unvested time-based restricted stock units was $185 thousand, which is expected to be recognized over a weighted-average period of less than one year.
| 19 |
Notes to the Consolidated Financial Statements (unaudited)
The following table summarizes the unvested performance-based restricted stock units as of March 31, 2025:
| Number of Unit Shares | Weighted - Average Number of Unit Shares | ||||||||
| Unvested at December 31, 2024 | $ | ||||||||
| Granted | |||||||||
| Forfeited/Cancelled | ( | ) | |||||||
| Balance at March 31, 2025 | $ | ||||||||
For restricted stock units with stock price appreciation targets, we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the restricted stock unit’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value of each grant was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the derived service period and there is no ongoing adjustment or reversal based on actual achievement during the period.
As of March 31, 2025, total unrecognized share-based
compensation cost related to unvested performance based restricted stock units was $
Warrants
The following table summarizes the activities for the Company’s warrants as of March 31, 2025:
| Number of Warrant Shares | Weighted- Average Exercise Price | Weighted - Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands)(1) | ||||||||||||||
| Balance as of December 31, 2024 | |||||||||||||||||
| Granted | |||||||||||||||||
| Exercised | ( | ) | |||||||||||||||
| Balance as of March 31, 2025 | $ | ||||||||||||||||
| Exercisable as of March 31, 2025 | $ | $ | |||||||||||||||
| (1) |
On January 13, 2025, the Company entered into
a warrant inducement agreement with an institutional investor and holder of existing warrants to purchase up to
The Company recognized the fair value of the new
warrants using the Black-Scholes option pricing model. The fair value of the new warrants were estimated at $
| 20 |
Notes to the Consolidated Financial Statements (unaudited)
The following table presents the assumptions used to estimate the fair value of the new warrants on January 13, 2025:
| January 13, 2025 | ||
| Risk free interest rate | ||
| Expected life | years | |
| Expected volatility | ||
| Expected dividend |
At-the-Market Equity Offering Program
On March 6, 2025, the Company entered into an
At-The-Market Sales Agreement (“ATM”) with Roth Capital Partners, LLC (“Roth”), pursuant to which the Company
may issue and sell, from time to time, shares of its common stock up to an aggregate offering price of $
In connection with the ATM program, the Company
incurred direct legal and audit fees totaling $
During the three months ended March 31, 2025, and as of the date of this filing, we have not sold any shares of common stock through the ATM.
NOTE 7—DEBT
PeriShip Global is a party to a debt facility
with PNC Bank, National Association (the “PNC Facility”). The PNC Facility includes a $
The PNC Facility includes a number of affirmative and restrictive covenants applicable to PeriShip Global, including, among others, a financial covenant to maintain a fixed charge coverage ratio of at least 1.10 to 1.00 at the end of each fiscal year, affirmative covenants regarding delivery of financial statements, payment of taxes, and establishing primary depository accounts with PNC Bank, and restrictive covenants regarding dispositions of property, acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates. PeriShip Global is also restricted from paying dividends or making other distributions or payments on its capital stock if an event of default (as defined in the PNC Facility) has occurred or would occur upon such declaration of dividend. On August 14, 2024, the Company signed a waiver and amendment which provided a waiver for a certain event of default and extended the line of credit to September 30, 2025. On February 28, 2025, we received a waiver as of December 31, 2024 for certain events of default. PeriShip Global was in compliance with all affirmative and restrictive covenants under the PNC Facility at March 31, 2025.
As of January 21, 2025, the Term Note balance
of $
As of March 31, 2025, $
Effective
October 17, 2022, the Company entered into an interest rate swap agreement, with a notional amount of $
| 21 |
Notes to the Consolidated Financial Statements (unaudited)
Convertible Debt
On August
25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory
notes for the aggregate principal amount of $
NOTE 8—INCOME TAXES
There are
Some of the federal tax carry forwards will expire
at various dates through 2037. Generally, these can be carried forward and applied against future taxable income at the tax rate applicable
at that time. We are currently using an effective income tax rate of
Utilization of the net operating losses (NOL) carryforwards may be subject to a substantial annual limitation as required by Section 382 of the IRC, due to ownership changes of the company that could occur in the future, as well as similar state provisions. In general, an “ownership change” as defined by Section 382 results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income.
In accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all, of the deferred tax assets may or will not be realized. The Company did not utilize any NOL deductions for the three months ended March 31, 2025.
NOTE 9– LEASES
The Company accounts for its leases under Accounting Standard Codification (“ASC”) Topic 842, “Leases”. The Company determines at its inception whether an arrangement that provides us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. We have elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Our current long-term leases include an option to extend the term of the lease prior to the end of the initial term. It is not reasonably certain that we will exercise the option and have not included the impact of the option in the lease term for purposes of determining total future lease payments. As our lease agreement does not explicitly state the discount rate implicit in the lease, we use our promissory note borrowing rate to calculate the present value of future payments.
In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.
| 22 |
Notes to the Consolidated Financial Statements (unaudited)
We have operating leases for office facilities. We do not have any finance leases.
Lease expenses are included in General & administrative expenses on the accompanying Consolidated Statements of Operations. The components of lease expense were as follows (in thousands):
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total lease costs | $ | $ | ||||||
Supplemental information related to leases was as follows (dollars in thousands):
| March 31, 2025 | December 31, 2024 | |||||||
| Operating Lease right-of-use asset | $ | $ | ||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Non-current portion of operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term for operating leases (years) | ||||||||
| Weighted average discount rate for operating leases | % | % | ||||||
The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities on our consolidated balance sheets as of March 31, 2025 (in thousands):
| Year ending December 31, | ||||
| 2025 (Excluding three months ended March 31, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future lease payments | ||||
| Less: current portion of lease liabilities | ( | ) | ||
| Long-term lease liabilities | $ | |||
NOTE 10– CONCENTRATIONS
For the three months ended March 31, 2025 and
2024, one customer represented
During the three months ended March 31, 2025,
and 2024, one vendor accounted for
As
of March 31, 2025, one customer made up
| 23 |
Notes to the Consolidated Financial Statements (unaudited)
NOTE 11 – SEGMENT REPORTING
As of March 31, 2025, we operated through two reportable business segments: (i) Precision Logistics and (ii) Authentication. The Chief Executive Officer is the chief operating decision maker (“CODM”). These segments reflect the way the CODM evaluates the Company’s business performance and allocates resources. The CODM assesses performance by using revenue, gross margin, operating expenses and net earnings. These metrics are analyzed by reviewing budget and forecast versus actual and prior year versus current year reporting. The various income performance measures are reviewed to ensure proper pricing strategies, effective cost controls and cash management across the organization. Reported revenue includes only the revenue generated by sales to external customers.
Precision Logistics: This segment offers a value-added service provider for time and temperature sensitive parcel management. Through logistics management from a sophisticated IT platform with proprietary databases, package and flight-tracking software, weather, traffic, as well as dynamic dashboards with real-time visibility into shipment transit and last-mile events that are managed by a service center we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries.
Authentication: This segment specializes in anti-counterfeit and brand protection.
We do not allocate the following items to the segments: general & administrative expenses and other income (expense).
The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated loss before income tax expense (in thousands):
| Three Months Ended | ||||||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Precision Logistics | Authentication | Consolidated | Precision Logistics | Authentication | Consolidated | |||||||||||||||||||
| NET REVENUE | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| COST OF REVENUE | ||||||||||||||||||||||||
| GROSS PROFIT | ||||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||
| Management and technology | ||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||
| Other Segment Items | ( | ) | ||||||||||||||||||||||
Total Segment expenses | ( | ) | ||||||||||||||||||||||
| Segment Income | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
General and Administrative | ( | ) | ( | ) | ||||||||||||||||||||
| Other Income (Expense) | ||||||||||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
NOTE 12 – SUBSEQUENT EVENTS
On April 1, 2025, the Company issued shares of common stock upon vesting of restricted stock units, net of shares withheld for taxes related to a stock grant on September 1, 2024.
| 24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and notes.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “estimate,” “continue,” “intended,” “plan,” “could,” “target,” “potential,” “will,” “would,” “expect” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.
Our actual results and financial condition may differ materially from those expressed or implied in such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law.
Overview
VerifyMe, Inc. (“VerifyMe,” the “Company,” “we,” “us,” or “our”), is a logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. We operate a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global and accounts for nearly all VerifyMe revenue, and an Authentication segment. Through our Precision Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported by a service center. Through our Authentication segment our technologies enable brand owners to deter counterfeit activities. Further information regarding our business segments is discussed below:
Precision Logistics: The Precision Logistics segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and handling to prevent spoilage and extreme delivery times and brand impairment. Utilizing predictive analytics from multiple data sources including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare and food industries.
Through our proprietary PeriTrack® customer dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.
Precision Logistics generates revenue from two business service models.
| · | ProActive Service – clients pay us directly for carrier service coupled with our proactive logistics assistance. |
| 25 |
| · | Premium Service – clients pay us directly or through our carrier partner for our complete white-glove shipping monitoring and predictive analytics service. This service includes customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution. |
Products: The Precision Logistics segment includes the following bundled services as part of our service offerings to our customers:
| · | PeriTrack®: Our proprietary PeriTrack® customer dashboard was developed utilizing our extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities based on real-time data. The PeriTrack® dashboard was designed to provide critical information in support of the specific needs of supply chain stakeholders and gives our customer resolution specialists a 360° view of shipping activity. PeriTrack® features tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique shipper’s in-transit shipments, with the ability to select and analyze data on individual shipments. |
| · | Service Center: We have assembled a team of customer resolution specialists based in the U.S. This service team resolves shipping problems on behalf of our customers. The service center acts as a help desk and monitors shipping to delivery for our customers. |
| · | Pre-Transit Service: We help clients prepare their products for shipments by advising clients on packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it during shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their unique needs. |
| · | Post-Delivery: We provide customized reporting for trend analysis, system performance reports, power outage maps, and many other reports to help our customers improve their processes and customer service outcomes. |
| · | Weather/Traffic Service: We have full-time meteorologists on staff to monitor weather. A package may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to maximize the number of timely and safely transmitted shipments. Similarly, traffic and construction also create unpredictable delays which our team works diligently to mitigate. If delays or other issues occur, we inform clients and work with them to proactively resolve such shipment issues. |
Authentication: The Authentication segment specializes in anti-counterfeit and brand protection. This is critical in the current landscape of increased counterfeit activity and customer expectations. VerifyMe has patented technologies that address the needs of brands.
Opportunities
Traditionally, most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. We utilize a variety of input sources beyond the carrier’s data feed. Our proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries.
Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs. The outsourcing of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of their businesses by focusing their resources on core competencies. We believe outsourcing this function to our Precision Logistics segment provides the ideal solution for all parties involved.
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Partnerships:
Precision Logistics has a direct partnership with a major global carrier company and has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier. In addition to relying on this strategic partner for shipping services we have a service agreement pursuant to which this strategic partner resells our services to its customers under a “white label” arrangement, which we refer to as our Premium service. Under this arrangement we provide our logistics services to our strategic partner’s customers in exchange for a pre-negotiated service fee per shipment. Our strategic partner has begun to provide its own service offerings to its customers and while we will continue to offer our Premium services, we expect our partner will prefer to offer their solution to customers as the primary recommendation and our solution will be offered as a secondary solution. This does not affect our Proactive services, and we expect to see growth under that service offering as we focus on providing Proactive services to customers directly.
Our Authentication segment has a contract with HP Indigo, and a strategic partnership with INX, the third largest producer of inks in North America. We believe these partnerships can be used to enable brand owners to securely prevent counterfeiting.
Current Economic Environment
In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession. The major carrier that PeriShip Global partners with laid out steps it has taken to significantly reduce permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In mid-December 2024, the carrier forecasted flat revenue year over year for 2025.
We have seen a softening in demand for some services related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. While a recession, whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe that the internal cost cutting measures, if implemented by the major global carrier may benefit out-sourced service providers. We are working with this major global carrier to address their small and medium-sized business clients, which we believe is an underserved market and presents growth opportunities for our Precision Logistics segment. However, the U.S. presidential administration has imposed tariffs on goods imported into the U.S. In response, several foreign governments have imposed new tariffs on certain goods imported from the U.S. and additional retaliatory measures against U.S. goods are expected. These or additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions. We can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results of operations.
Seasonality
We experience seasonal fluctuations in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than in other quarters due to increased holiday shipments. The seasonality of our business may cause fluctuations in our quarterly operating results.
Results of Operations
Comparison of the three months ended March 31, 2025, and 2024
The following discussion analyzes our results of operations for the three months ended March 31, 2025 and 2024.
| Revenue | Three Months Ended March 31, | |||||||
| 2025 | 2024 | |||||||
| Precision Logistics | $ | 4,429 | $ | 5,614 | ||||
| Authentication | 26 | 145 | ||||||
| Total Revenue | $ | 4,455 | $ | 5,759 | ||||
Consolidated revenue decreased $1,304 thousand or 23% during the first quarter of 2025 compared to the first quarter of 2024. The decrease is primarily due to the decreased demand across several of our proactive customers as well as one customer’s shift to use their cold chain strategy, a discontinued contract with one customer in our Premium services, partially offset by an increase in remaining premium revenue. The decrease in revenue in our authentication segment is primarily due to the divestiture of our Trust Codes Global business in December 2024.
| Gross Profit | Three Months Ended March 31, | |||||||||||||||
| 2025 | 2024 | |||||||||||||||
| % of Revenue | % of Revenue | |||||||||||||||
| Precision Logistics | $ | 1,470 | 33 | % | $ | 2,129 | 38 | % | ||||||||
| Authentication | 20 | 77 | % | 131 | 90 | % | ||||||||||
| Total Gross Profit | $ | 1,490 | 33 | % | $ | 2,260 | 39 | % | ||||||||
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Gross profit for the three months ended March 31, 2025, was $1,490 thousand, compared to $2,260 thousand for the three months ended March 31, 2024. The resulting gross margin was 33% for the three months ended March 31, 2025, compared to 39% for the three months ended March 31, 2024. The gross profit decrease relates primarily to the decreased Premium services revenue which has higher margins and the Authentication decrease from the divestiture of our Trust Codes Global business in December 2024. Gross margin related to our Proactive services increased during Q1 2025.
Segment Management and Technology
Segment management and technology expenses decreased by $455 thousand to $926 thousand for the three months ended March 31, 2025, compared to $1,381 thousand for the three months ended March 31, 2024. The decrease relates primarily to the divestiture of Trust Codes Global in December 2024 and gain on derecognized liability in our Authentication segment and decrease in management wages in our Precision Logistics segment. Amortization and depreciation expense of $286 thousand for Q1 2025 compared to $299 thousand in Q1 2024.
General and Administrative Expenses
General and administrative expenses decreased by $265 thousand to $856 thousand for the three months ended March 31, 2025, compared to $1,121 thousand for the three months ended March 31, 2024. The decrease relates primarily to a decrease in stock-based compensation from $366 thousand for the three months ended March 31, 2024 to $232 thousand for the three months ended March 31, 2025.
Research and Development
Research and development expenses were $5 thousand and $55 thousand for the three months ended March 31, 2025, and 2024, respectively. The decrease relates to divestiture of our Trust Codes Global business in December 2024.
Sales and Marketing
Sales and marketing expenses decreased by $54 thousand to $296 thousand for the three months ended March 31, 2025, compared to $350 thousand for the three months ended March 31, 2024. The decrease is primarily related to a reduction in employees and consultants in our Authentication segment partially offset by an increase in employees in our Precision Logistics segment.
Interest Income(Expense), net
Interest income, net was $22 thousand for the three months ended March 31, 2025, compared to interest expense, net of $38 thousand for the three months ended March 31, 2024. In the three months ended March 31, 2025, the Company repaid the Term Note reducing the interest expense. The Company also invested the proceeds from the warrants exercise in January 2025 increasing interest income.
Net Loss
Consolidated net loss for the three months ended March 31, 2025, and 2024 was $571 thousand and $553 thousand, respectively. Although our loss before other income (expense) decreased, our net loss increased by $18 thousand. The increased loss was primarily related to the fair value gain on contingent consideration in the three months ending March 31, 2024 that did not recur in 2025, partially offset by the change in interest income (expense). The resulting consolidated loss per share for the three months ended March 31, 2025, and three months ended March 31, 2024, was $0.05 and $0.05 per diluted share, respectively.
Liquidity and Capital Resources
Our operations used $404 thousand of cash during the three months ended March 31, 2025, compared to $60 thousand during the comparable period in 2024. The increase in cash used from operations is due to unfavorable changes in working capital accounts in the three months ended March 31, 2025.
Cash used in investing activities was $156 thousand during the three months ended March 31, 2025, compared to $110 thousand during the three months ended March 31, 2024. The increase in spend in investing activities relates primarily to increased capitalized software costs in the three months ended March 31, 2025.
Cash provided by financing activities during the three months ended March 31, 2025, was $3,444 thousand compared to cash used in financing activities during the three months ended March 31, 2024 of $106 thousand. The increased cash primarily relates to proceeds from the exercise of warrants, partially offset by the repayment of the Term Note during the three months ended March 31, 2025.
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On January 13, 2025, we entered into an Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to 1,461,896 shares of our common stock for $4.7 million in gross proceeds. The existing warrants were originally issued on April 14, 2022, with an exercise price of $3.215 per share, and became exercisable six months following issuance. Pursuant to the Inducement Letter Agreement, the holder agreed to exercise the existing warrants for cash at the exercise price of $3.215 per share in consideration for our agreement to issue a new unregistered warrant to purchase up to an aggregate of 1,461,896 shares of common stock at an exercise price of $4.00 per share. The new warrant was immediately exercisable upon issuance and has a term of five and one-half years from the issuance date.
The Company recognized the fair value of the new warrants, calculated using the Black-Scholes option pricing model, as $3,971 thousand. The transaction was treated as an equity issuance, and the fair value of the new warrants was recorded in additional paid-in capital. Direct transaction costs totaling approximately $352 thousand, including legal fees and placement agent commissions, were also recorded as a reduction to additional paid-in capital.
On March 6, 2025, the Company entered into an ATM with Roth pursuant to which the Company may issue and sell, from time to time, shares of its common stock up to an aggregate offering price of $15.8 million. Roth acts as the sales agent and is entitled to a 3.0% commission on gross proceeds from sales under the program.
In connection with the ATM, we incurred direct legal and audit fees totaling $100 thousand. These costs have been recorded as deferred offering costs within other current assets and will be reclassified to additional paid-in capital and amortized over a period of one year once shares are issued. Deferred offering costs will be assessed for recoverability at each reporting period. If management determines that the ATM program is not probable to be utilized, the deferred costs will be expensed to general and administrative expenses.
During the three months ended March 31, 2025, and as of the date of this filing, we have not sold any shares of common stock through the ATM.
On September 22, 2022, we entered into the PNC Facility with PNC Bank, National Association. The PNC Facility includes a $1 million RLOC. The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The RLOC is guaranteed by the Company and secured by the assets of PeriShip Global and the Company. As of March 31, 2025, $0 was outstanding on the RLOC.
The PNC Facility included a four-year Term Note for $2 million which matured in September of 2026 and required equal quarterly payments of principal and interest. The Term Note incurred interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The PNC Facility is guaranteed by VerifyMe and secured by the assets of PeriShip Global and VerifyMe. As of January 21, 2025, the Term Note was paid in full and no future principal payments are due.
We believe that our cash and cash equivalents will fund our operations beyond the next 12 months. We may issue additional debt or equity as we grow our business which we expect to grow organically, and if the opportunity arises, through key acquisitions that will help accelerate the growth of our business.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
None.
Recently Adopted Accounting Pronouncements
Recently adopted accounting pronouncements are discussed in Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s Chief Executive Officer, our principal executive officer, and Chief Financial Officer, our principal financial officer, have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2025, the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There have been no other changes in our internal controls over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent Quarterly Reports on Form 10-Q, except as noted herein.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On March 31, 2025, the Company issued 60,000 shares of common stock for services rendered to the Company pursuant to a Consulting Agreement between the Company and Pentant LLC, effective November 15, 2023, as amended June 30, 2024 (the “Consulting Agreement”). The securities issued pursuant to the Consulting Agreement were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During the three months ended March 31, 2025, no director or officer
of the Company
ITEM 6. EXHIBITS
*Filed herewith
**Furnished herewith
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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.
| VERIFYME, INC. | |
| Date: May 13, 2025 | By: /s/ Adam Stedham |
| Adam Stedham | |
|
Chief Executive Officer and President
(Principal Executive Officer) | |
| Date: May 13, 2025 | By: /s/ Nancy Meyers |
|
Nancy Meyers Executive Vice President and | |
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting |
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