UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K (“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,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “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. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, those factors set forth under Item 1A - Risk Factors and those other risks and uncertainties detailed in our periodic reports and registration statements filed with the Securities and Exchange Commission (“SEC”). We caution that these risk factors may not be exhaustive.
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 or as indicated. 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.
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PART I
ITEM 1. BUSINESS.
Overview
VerifyMe, Inc. (“VerifyMe,” the “Company,” “we,” “us,” or “our”), is a specialized 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, 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.
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 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. |
| · | 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. |
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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
Precision Logistics: 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.
Authentication: We believe the products in our Authentication segment have applications in many areas. Currently, we are marketing opportunities in the areas of preventing counterfeit and protecting customer brands.
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. In April 2023, the major carrier that PeriShip Global partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In June 2023, the major carrier stated that due to ongoing demand, it plans to ground 29 more aircraft in its fiscal year that started in June 2024. 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, 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.
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Divestitures
On December 8, 2024, we sold our Trust Codes Global business pursuant to a Share Sale Agreement with Paul Ryan, former Executive Vice President of the Authentication Segment and employee of Trust Codes Global Limited. The purchase price per the agreement was $1 NZD. We recognized a loss of $0.1 million on the sale of the business. During the year ended December 31, 2024, $0.1 million was reclassified from accumulated other comprehensive loss into earnings and is included in general and administrative in our consolidated statements 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.
Our Intellectual Property
Intellectual property is important to our business. As of December 31, 2024, our current patent and trademark portfolios consist of nine granted U.S. patents and two granted European patents, two pending foreign patent applications, twenty-one registered U.S. trademarks and several foreign trademarks. The Company abandoned one patent during the year ended December 31, 2024.
While some of our granted patents are commercially ready, we believe that others may have commercial application in the future but will require additional capital and/or a strategic partner in order to reach the potential markets. All of our patents are related to the inventions described above. Our registered patents expire between the years 2025 and 2043. The expiration date of a pending application that matures into a registration depends upon the issuance date and any adjustment under 35 U.S.C. 154(b).
The issuance of a patent is considered prima facie evidence of validity. The granting of a patent does not prevent a third party from seeking a judicial determination that the patent is invalid. Such challenges to the validity of a patent are not uncommon and can be successful. There can be no assurance that a challenge will not be filed to one or more of our patents, if granted, and that if filed, such a challenge will not be successful.
We have trademarked the VerifyMeTM brand in the United States and have registered and pending applications with respect to our brand internationally. However, our name and brand could be confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. We are aware of names and marks similar to our service marks being used from time to time by other persons that could result in confusion and may diminish the value of our brands and adversely affect our business. See Item 1A “Risk Factors” for additional information regarding the risk of confusion of our name with other brands and other intellectual property risks.
Research and Development
Research and development efforts were focused on expanding our technology into new areas of implementation and to develop unique customer applications. We spent approximately $70 thousand and $107 thousand during the years ended December 31, 2024, and 2023, respectively, on research and development.
We continue to monitor the market for state-of-the-art innovation and may either develop, partner to deploy or seek to acquire new technologies, products and services in the future, if we believe it would provide a competitive market advantage and could be successfully monetized.
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Sales and Marketing Strategy
Business development and sales resources are aligned to support existing customer accounts and new customer development. We use social media channels, such as LinkedIn, and Meta (f/k/a Facebook) as a means of marketing our services. By staying in contact and engaging with customers, we are able to identify possible needs and look for opportunities to expand the services we are providing. We are currently revising and optimizing our websites to improve customer engagement and SEO. We will also continue to participate in trade show attendance which had declined during the height of the COVID pandemic.
Competition
PeriShip Global has developed its own software portal with predictive analytics for weather, traffic, power grids, and data feeds it receives from one of the world’s largest logistics carriers. There are other companies that operate a similar business model, however most of these companies specialize in a particular field such as healthcare or non-perishable building materials. Our Precision Logistics segment operates in all of the perishable segments. In addition, the major carriers such as FedEx, UPS and DHL all have internal operations servicing the critical time, temperature, and cold storage shipping segment.
The market for protection from diversion, theft and forgery is a highly fragmented industry that includes smaller companies as well as a number of large, well-established companies. In general, we believe competition in our principal markets is primarily driven by product performance, features and liability; price; ease of implementation, technology effectiveness, digital instant verification; new laws and regulations; product innovation and timing of new product introductions; ability to develop, maintain and protect proprietary products and technologies; sales and distribution capabilities; technical support and service; brand loyalty; applications support; and breadth of product line.
Some of our competitors have substantially greater financial, human and other resources than we have. As a result, we may not have sufficient resources to develop and market our services to the market effectively. We expect competition with our products and services to continue and intensify in the future.
Major Customers/Vendors
During the year ended December 31, 2024, one customer represented 16% of revenues and one customer represented 17% of revenues for the year ended December 31, 2023.
As of December 31, 2024, two customers made up 36% of accounts receivable. As of December 31, 2023, three customers accounted for 47% of total accounts receivable.
During the year ended December 31, 2024, and December 31, 2023, one vendor accounted for 99% of transportation costs, in our Precision Logistics segment.
Employees and External Sales Force
As of December 31, 2024, we employed approximately forty persons and four consultants. Of these employees, approximately forty were employed in our Precision Logistics operations and four were employed by our Authentication operations. Because of the nature of our business, many of our employees and consultants can, and do, conduct their work for us remotely.
We have also entered into commissioned sales contract arrangement with our strategic partner, HP Indigo.
Available Information
We make available free of charge on our website, www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC. We have not incorporated by reference into this Report the information included, or that can be accessed through, our website and you should not consider it to be part of this Report.
The SEC maintains an Internet website, www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC.
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ITEM 1A. RISK FACTORS
Any investment in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below and all information contained in this Report, before you decide whether to purchase our securities. If any of the following risks or uncertainties actually occur, our business, financial condition, results of operations and prospects would likely suffer, possibly materially. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.
Risks Relating to Our Business
We have engaged, and may engage in future, acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. To realize the anticipated benefits of any potential acquisitions, we must successfully integrate those businesses with ours. The integration of any potential acquisition or strategic partnership entails numerous risks, including:
| · | increased operating expenses and cash requirements; |
| · | the assumption of indebtedness or contingent liabilities; |
| · | dilution of our stockholder’s equity due to the issuance of additional equity securities; |
| · | assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; |
| · | the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition; |
| · | retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; and |
| · | our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. |
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
Failure to attract and retain management, and develop successors for management, may damage our operations and financial results and cause our stock price to decline.
We depend, to a significant degree, on the skills, experience and efforts of our management team, and other personnel, particularly in the management of our subsidiary PeriShip Global. Our failure to attract, integrate, motivate and retain existing or additional personnel in a timely fashion, and develop successors with commensurate skills and talents, could disrupt or otherwise harm our operations and financial results. The loss of services of certain of our management team and key employees, an inability to attract or retain qualified personnel in the future could delay the development of and negatively impact the operations and profitability of our business.
Our future growth will depend upon the success of our Precision Logistics segment and future businesses we may acquire. If we fail to effectively execute our strategy, our competitive position and financial performance could be materially harmed.
Our future growth will depend upon the success of our Precision Logistics segment and future businesses we may acquire. We are currently engaged in efforts to find and acquire businesses, which is intended to streamline operations, improve profitability and improve our overall competitiveness. The successful execution of our strategy is subject to significant uncertainties and may require additional capital and operational expenditures. If we fail to execute our strategy effectively, our ability to realize the intended benefits may be compromised. Even if we successfully implement our strategy, we may not see the intended results, diminishing the expected improvements to efficiency or revenue generation. This could materially and adversely affect our competitive position, financial performance, and brand reputation.
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Our Precision Logistics segment relies on one key strategic partner for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.
Our business is dependent, and we believe that it will continue to depend on our relationship with one strategic partner. PeriShip Global partners with one major global carrier for all its customers’ shipping needs. While we work closely with this key strategic partner and have transportation services and pricing agreements in place covering the shipping services they provide to our customers, such agreements are subject to termination or modification from time to time. If our strategic partner is unwilling or unable to supply to us the shipping services we market and sell on acceptable terms, or at all, or otherwise elects to terminate its business relationship with us, we may not be able to obtain alternative shipping services from other providers on acceptable terms, in a timely manner, or at all, and our business may be materially and adversely impacted. We do not currently have any alternative shipping service suppliers from which we can obtain the shipping services we currently receive from our strategic partner. Establishing the necessary information technology infrastructure and business relationship with another shipping services provider would be costly and time consuming and may ultimately not be successful or cost-effective. Further, any increase in the prices charged by our single strategic partner or failure to perform by our strategic partner could cause our costs to increase or could cause us to experience short-term unavailability of shipping services on which our business relies.
In particular, delays and other shipping disruptions at our strategic partner significantly negatively impact our business. Our business involves the shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilage and reputational harm. An increase in delays and other shipping disruptions on the part of our strategic partner could cause our clients to seek shipping solutions from our competitors who use alternative shipping service providers. If these events occur, it may reduce our profitability or may cause us to increase our prices. In addition, any material interruptions in shipping services by this strategic partner may result in significant cost increases and reduce sales, which could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
In addition to relying on this strategic partner for shipping services, a material portion of our revenue has been generated through 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 a 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. Sales through our strategic partner accounted for approximately 16% of revenue of our Precision Logistics segment for the year ended December 31, 2024, and 17% for the year ended December 31, 2023. Our strategic partner has begun to provide its own service offerings to its customers, and we expect revenue from our Premium Services in our Precision Logistics segment will begin to decrease as we experience a reduction in business for these services. If we fail to offset a reduction in business for our Premium Services in our Precision Logistics segment through our ProActive Services or other service offerings, our business, financial condition and results of operations could be materially adversely affected.
Our business is subject to seasonal trends.
Historically, our operating results in the Precision Logistics segment have been subject to seasonal trends when measured on a quarterly basis. Our first and second quarters have traditionally been the weakest compared to our third and fourth quarters. This trend is dependent on numerous factors including economic conditions, customer demand and weather. Because revenue is directly related to the available working days of shippers, national holidays and the number of business days during a given period may also create seasonal impact on our results of operations. After the winter holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. In addition, a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a large degree, affected by factors that are outside of our control. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.
Severe climate conditions and other catastrophic events can have an adverse impact on our business.
Our business involves the shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilage and reputational harm. Disasters, severe weather, public health issues, such as pandemics, earthquake, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, or other catastrophic event may cause shipment delays or an inability to ship, which could prevent, delay or reduce shipment volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues. In particular, certain weather-related conditions such as ice and snow can disrupt the operations of our carrier partners during the peak holiday season, which could have a disproportionately large negative impact on our business and revenues.
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We operate in a highly competitive industry and our business may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.
The transportation and logistics industry is highly competitive, cyclical, and is expected to remain so for the foreseeable future. We face competition in all geographic markets and each industry sector in which we operate. We have and may face continued competition by strategic partners. Many of these competitors have significantly more resources and are actively pursuing acquisition opportunities and are developing new technologies to gain competitive advantages. The primary competitive factors are price and quality of service. Increased competition or our inability to compete successfully may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of customer relationships, any one of which could affect our business and financial results. Numerous competitive factors could impair our ability to maintain our current profitability, including the following:
| · | our competitors may periodically reduce their prices to gain business, especially during times of weak economic conditions, which may limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer relationships; |
| · | our inability to achieve expected customer retention levels or sales growth targets; |
| · | we compete with many other transportation and logistics service providers, which has included and may include our strategic partners, some of which have greater capital resources or lower cost structures than us; |
| · | our strategic partners may take steps to position their own product offerings as a replacement or competitor to our service offerings; |
| · | our inability to compete with existing and new entrants in the market that may offer similar services at lower cost or have greater technological capabilities; |
| · | customers may choose to provide for themselves the services that we now provide; |
| · | many customers periodically accept proposals from multiple carriers for their shipping needs, and this process may depress rates or result in the loss of some of our business to competitors; and |
| · | advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments; and |
| · | we may not have sufficient resources to develop and market our services effectively, or at all. |
There can be no assurance that such competitive factors will not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our customers, entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by strategic partners. Any of these factors could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
The shipping and logistics industry is rapidly evolving. We expect to continue to face significant competition, which could materially adversely affect us.
The shipping and logistics industry is rapidly evolving, including demands for faster deliveries and increased visibility into shipments. We expect to face significant competition on a local, regional, national and international basis. Competitors include the U. S. and other international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that have made and continue to make significant investments in their own logistics capabilities, some of whom are currently our customers. We also face competition from start-ups and other smaller companies that combine technologies with crowdsourcing to focus on local market needs. Competition may also come from other sources in the future as new technologies are developed. Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing or able to offer. Additionally, to sustain the level of service and value that we deliver to our customers, from time to time we may raise prices and our customers may not be willing to accept these higher prices. If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining our profitability, we could be materially adversely affected.
Our future growth will depend upon the success of our strategic partners who integrate our solutions into their product offerings.
We rely on strategic partnerships with one large logistics carrier for our Precision Logistics segment and larger companies which integrate our technologies into their product offerings for our legacy Authentication segment. These strategies leave us largely dependent upon the success of our partners. If any of our strategic partners who include our technology in their products cease to do so, or we fail to obtain other partners who will incorporate, embed, integrate or bundle our technology, or these partners are unsuccessful in their efforts, expanding deployment of our technology, our business and future growth would be materially and adversely affected.
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Damage to our brand image and corporate reputation could materially adversely affect us.
Our success depends on our ability to consistently deliver operational excellence and strong customer service. Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth. Adverse publicity (whether or not justified) relating to activities by our employees, contractors, suppliers, agents or others with whom we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increase in the use of social media outlets such as Meta (f/k/a Facebook), YouTube, Instagram, LinkedIn and X (f/k/a Twitter), adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could have a material adverse effect on us, and could require additional resources to rebuild our reputation and restore the value of our brand.
The Company has significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on the Company's financial results.
As of the date of this Report, the Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip Global business in 2022. A number of factors may result in impairments to goodwill and other intangible assets, including significant negative industry or economic trends, disruptions to our business, increased competition and significant changes in the use of the assets.
Impairment charges could adversely affect the Company's financial condition or results of operations in the periods recognized.
Our customers’ businesses may be negatively affected by various economic and other factors such as recessions, downturns in the economy, inflation, global uncertainty and instability, the effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets, which may decrease demand for our services or increase our costs.
Adverse economic and other conditions, both in the United States and internationally, can negatively affect our customers’ business levels, the amount of logistics services they need, their ability to pay for our services and overall freight levels, any of which might impair our profitability. For example, inflation and uncertainty and instability in the global economy and geopolitical events may lead to fewer goods being transported. Many of the products our clients ship are luxury or discretionary products and the demand for such products may decrease in adverse economic times. Further, when adverse economic times arise, customers may select competitors that offer lower rates or choose to ship their goods without logistical support in an attempt to lower their costs. In addition, changes in the United States’ or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may negatively impact our customers. These and other economic factors such as recessions could have an adverse effect on our business, financial conditions and results of operations and we might be forced to lower our rates or lose customers.
Overall economic conditions that reduce freight volumes could have a material adverse impact on our operating results and ability to achieve growth.
We are sensitive to changes in overall economic conditions that impact customer shipping volumes. The transportation and logistics industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest and currency rate fluctuations, inflation and other economic factors beyond our control. Changes in U.S. or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by effected countries, resulting in “trade wars” impacting the volume of economic activity globally and in the United States, and as a result, shipping volumes may be materially reduced. Such a reduction may materially and adversely affect our business.
Reductions in discretionary consumer spending could have an adverse effect on our business, financial condition, and results of operations.
The services and products we provide are sensitive to reductions from time to time in discretionary consumer spending. For example, demand for high-end perishable items, and subsequently the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and products. As a result, we cannot ensure that demand for our services and products will materialize or remain constant. In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession. In April 2023, the major carrier that PeriShip Global partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In June 2023, the major carrier stated that due to ongoing demand its plans to ground 29 more aircraft in its fiscal year that started in June 2024. In mid-December 2024 the carrier forecasted flat revenue year over year for 2025.
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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, including PeriShip Global. Additionally, PeriShip Global is working with this major global carrier to address their small and medium sized business clients, which we believe is an underserved segment and presents considerable growth opportunities for PeriShip Global. However, 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. Adverse developments affecting economies throughout the world, including a general tightening of availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could lead to a further reduction in consumer discretionary spending and have an adverse effect on our business, financial condition, and results or operations.
Global supply-chain delays and shortages may adversely impact our customers or potential customers.
Global supply-chain delays and shortages, which are out of our control, are currently affecting a wide variety of businesses globally including one of our customers. Supply-chain delays shortages may affect our customers or potential customers which would adversely affect our operations.
We have a history of losses and we may never achieve or maintain profitability.
Since our inception, we have incurred operating losses each year due to costs incurred in connection with research and development activities and general and administrative expenses associated with our operations. In addition, we have made significant expenditures on acquisitions and may continue to complete acquisitions in the future. We expect to continue to incur expenditures to develop and market our services and to make acquisitions and could continue to incur operating losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our ability to generate profits will depend, in part, on our expenses and our ability to generate revenue. Our prior losses and any future losses have had and may continue to have an adverse effect on our working capital. If we fail to generate revenue and become profitable, or if we are unable to fund our continuing losses, our shareholders could lose all or part of their investments.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Our net operating loss carryforwards ("NOLs"), and certain other tax attributes could be unavailable to offset future income tax liabilities because of restrictions under U.S. tax law. Under the Tax Cuts and Jobs Act, or the TCJA, federal NOLs generated in tax years ending after December 31, 2017, may be carried forward indefinitely. The carryforwards are limited to 80% of each subsequent year's net income.
In addition, Sections 382 and 383 of the Internal Revenue Code (“IRC”), contain rules that limit the ability of a corporation that undergoes an "ownership change" (generally, any change in ownership of more than 50% of the corporation's stock over a three-year period) to utilize its pre-change NOLs and tax credit carryforwards to offset future taxable income. These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly 5% or more of the stock of a corporation and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOLs and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the corporation's stock immediately before the ownership change. The Company completed an IRC Section 382 analysis in 2022 and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed an IRC Section 382 analysis in 2023 or 2024. In the event future ownership changes are determined, we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire, in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced an ownership change.
Because our name and brand could be confused with brands that have similar names, we may be adversely affected by any confusion or negative publicity related to others that use a name similar to VerifyMe in their brand names.
We have trademarked the VerifyMeTM brand in the United States and have pending applications with respect to our brand internationally. However, our name and brand has been and could be in the future confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. and www.verifyme.ng, a website offering verification services in Nigeria. We have attempted to contact the operators of the Nigeria website to resolve the confusion caused there but to date have been unsuccessful in our efforts. Further, we have registered certain trademarks and service marks in the United States and foreign jurisdictions. We are aware of names and marks similar to our service marks being used from time to time by other persons. Although we oppose any such infringement, further or unknown unauthorized uses or other misappropriation of our trademarks or service marks may diminish the value of our brands and adversely affect our business.
If our technologies do not work as anticipated once we achieve meaningful sales, we will not be successful.
Our business depends on our ability to market and sell our technology. Without material sales and acceptance from customers with respect to our technologies, we will not be successful. We can provide no assurances that the market will accept our products or that we will achieve any meaningful sales.
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If our technology cannot be used successfully to proactively provide analytics logistics management, we may not be able to generate material revenue.
Our proprietary technology is the core of our PeriShip Global operations. The failure of our technology will result in the stoppage of our operation. Due to the fact our business is the monitoring of time sensitive goods movement, any stoppage will result in the financial loss and service liability damage. In order to stay competitive, we need to ensure the continuity and the timeliness of our service, it is essential that the technology platform has redundancy built in, high performing and scalable.
We may not continue to invest in our Authentication segment operations and as a result, we may not be able to complete the development and commercialization of our Authentication segment products.
Given our planned use of capital, we may not have the ability to fund and invest in the development and commercialization of our Authentication segment. If we do not invest in our Authentication segment, we may have to significantly delay, scale back or discontinue our operations and the development or commercialization of our Authentication Segment, which could harm our results of operations.
Our Authentication segment has historically targeted large companies and, their internal policies and resistance to change may impair our ability to successfully commercialize our Authentication segment..
Our ability to become successful and generate positive cash flow within our Authentication segment will be dependent upon the extent of commercialization of products using our technology. Commercialization of new technology products often has a very long lead time. This problem is exacerbated when customers are large entities. Our current and target customers are large entities. These factors may adversely affect our ability to commercialize our Authentication technologies. Further, we cannot assure you that commercialization will result in profitability.
We will need to expand our sales, marketing and support organizations and our distribution arrangements to increase market acceptance of our products and services.
We currently have a limited number of sales, marketing, customer service and support personnel and may need to increase our staff, or further outsource our sales process, to generate a greater volume of sales and to support any new customers or the expanding needs of existing customers. The employment market for sales, marketing, customer service and support personnel in our industry is very competitive, and we may not be able to hire the kind and number of sales, marketing, customer service and support personnel we are targeting. Our inability to hire or outsource qualified sales, marketing, customer service and support personnel may harm our business, operating results and financial condition. We may not be able to sufficiently build out our distribution network or enter into arrangements with qualified sales personnel on acceptable terms or at all. If we are not able to develop greater distribution capacity, we may not be able to generate sufficient revenue to continue our operations.
If we fail to protect or enforce our intellectual property rights, or if the costs involved in protecting and defending these rights are prohibitively high, our business and operating results may suffer.
We rely on intellectual property in order to maintain a competitive advantage. As such, we strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We may enter into confidentiality and invention assignment agreements with our employees and confidentiality agreements with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.
As management deems appropriate, we will pursue the registration of our domain names, trademarks, and service marks in the U.S. and in certain locations outside the U.S. We will seek to protect our trademarks, patents and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming and may not be successful or which we may not pursue in every location. It may be expensive and cost prohibitive to file patents worldwide and we may be financially required to file patents in select countries where we see the greatest potential for our technologies. We may, over time, increase our investment in protecting our innovations through increased patent filings that are expensive and time-consuming and may not result in issued patents that can be effectively enforced.
The terms of our patents may not be sufficient to effectively protect our business.
In most countries in which we file patent applications, including the U.S., the term of an issued patent is twenty years from the earliest claimed filing date of a non-provisional patent application in the applicable country. With respect to any issued patents in the U.S., we may be entitled to obtain a patent term extension or extend the patent expiration date provided we meet the applicable requirements for obtaining such patent term extensions. Although such extensions may be available, the life of a patent and the protection it affords is by definition limited. In addition, the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our technologies. Upon the expiration of our issued patents, we will not be able to assert such patent rights against potential competitors and our business and results of operations may be adversely affected.
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If we are required to sue third parties who we allege are violating our intellectual property rights, or if we are sued for violating a third party’s patents or other intellectual property rights, we may incur substantial expenses, and we could incur substantial damages, including amounts we cannot afford to pay.
Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. Patent and intellectual property litigation is extremely expensive and beyond our ability to pay. While third parties do, under certain circumstances, finance litigation for companies that file suit, we cannot assure you that we could find a third party to finance any claim we choose to pursue. Moreover, third parties frequently refuse to finance companies that are sued. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources, any of which could adversely affect our business and operating results. If we fail to maintain, protect and enforce our intellectual property rights, our business and operating results may be harmed.
From time-to-time, we may face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including from our competitors and inactive entities. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement, we may be obligated to cancel the launch of a new feature or product, stop offering certain features or products, pay royalties or significant settlement costs, purchase licenses or modify our products and features.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (“SOX”). We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources.
SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.
Our management concluded that our disclosure controls and procedures were effective as of December 31, 2024. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.
Material weaknesses in our disclosure controls and internal control over financial reporting may be identified in the future. Any failure to maintain existing or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. If we are unable to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.
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Because we do business outside of the United States, we may be exposed to liabilities under the Foreign Corrupt Practices Act, violations of which could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations and agreements with third parties and make sales in jurisdictions which may be subject to corruption. These activities create the risk of unauthorized payments or offers of payments by one of the employees, consultants or agents of our Company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
Our business depends on our ability to successfully develop, implement, maintain, upgrade, enhance, protect and integrate information technology systems.
We rely heavily on the proper functioning and availability of our information technology systems for our operations as well as for providing value-added services to our customers. Our information systems are integral to the efficient operation of our business. We strive to be best in class, and in order to do so, we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response to these trends, which may lead to significant ongoing software development costs and capital investments in information technology infrastructure. We may be unable to accurately determine the needs of our customers and integrate cohesively with our key strategic partner, and identify the trends in the transportation services industry, in a timely and cost-effective manner, which could result in decreased demand for our services and a corresponding decrease in our revenues. Despite testing, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations. We may also be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost. We must maintain and enhance the reliability and speed of our information technology systems to remain competitive and effectively handle higher volumes of shipments. If our information technology systems are unable to manage additional volume for our operations as our business grows, or if such systems are not suited to manage the various service modes we offer or businesses we acquire, our service levels and operating efficiency could decline. If we fail to hire and retain qualified personnel to implement, protect and maintain our information technology systems or if we fail to upgrade our systems to meet our customers’ and strategic operating partners’ demands, our business and results of operations could be seriously harmed. This could result in a loss of customers or a decline in the volume of shipments we receive from customers.
Our information technology systems also depend upon the Internet, third-party service providers, global communications providers, satellite-based communications systems, the electric utilities grid, electric utility providers and telecommunications providers as well as their respective vendors. The services and service providers have all experienced significant system failures and outages at some point in the past. We have minimal control over the operation, quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential to our business. Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, such as floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations and financial position.
Our information technology systems are subject to cyber and other risks some of which are beyond our control. A security breach, failure or disruption of these services could have a material adverse effect on our business, results of operations and financial position.
Our information systems are integral to the efficient operation of our business and handle sensitive customer and shipment data. It is critical that the data processed by these systems remain secure, as it often includes competitive customer information, confidential transaction data, employee records and key financial and operational results and statistics. The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually or in coordinated groups, to launch distributed denial of service attacks, ransomware or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued to increase in recent years. We utilize third-party service providers who have access to our systems and certain sensitive data, which exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection. While we and our third-party service providers have experienced cyber-attacks and attempted breaches of our and their information technology systems and networks or similar events from time to time, no such incidents have been, individually or in the aggregate, material to us. Cyber incidents that impact the security, availability, reliability, speed, accuracy or other proper functioning of our systems, information and measures, including outages, computer viruses, theft or misuse by third parties or insiders, break-ins and similar disruptions, could have a significant adverse impact on our operations.
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It is difficult to fully protect against the possibility of power loss, telecommunications failures, cyber-attacks, ransomware and other cyber incidents in every potential circumstance that may arise. A significant cyber incident, including system failure, security breach, disruption by malware or ransomware, or other damage, could interrupt or delay our operations, damage our reputation and brand, cause a loss of customers, expose us to a risk of loss or litigation, result in regulatory scrutiny, investigations, actions, fines or penalties and/or cause us to incur significant time and expense to remedy such an event, any of which could have a material adverse impact on our results of operations and financial position. Furthermore, any failure to comply with data privacy, biometric privacy, data security or other laws and regulations could result in claims, legal or regulatory proceedings, inquiries or investigations. To comply with this changing landscape, we may be required to further segregate our systems and operations, implement additional controls, or adopt new systems, all of which could increase the cost and complexity of our operations. In addition, our insurance is intended to address costs associated with aspects of cyber incidents, network failures and privacy-related concerns, and may not sufficiently cover all types of losses or claims that may arise.
Evolving regulations concerning data privacy may result in increased regulation and different industry standards, which could prevent us from providing our current products to our users, or require us to modify our products, thereby harming our business.
The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet and mobile platforms have recently come under increased public scrutiny, and civil claims alleging liability for the breach of data privacy have been asserted against companies. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices.
Many jurisdictions have already taken steps to restrict and penalize companies that collect and utilize information from their users and the general public. For example, in May 2018 the European Union made sweeping reforms to its existing data protection legal framework by enacting the General Data Protection Regulation (the “GDPR”), which resulted in a greater compliance burden for many companies with users in Europe. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are broader and more stringent than those previously in place in the European Union and in most other jurisdictions around the world. The GDPR also imposes significant penalties for non-compliance, including fines of up to €20 million or 4% of total worldwide revenue.
Additionally, we may be subject to increasingly complex and expansive data privacy regulations within the United States. For example, California enacted the California Consumer Privacy Act (the “CCPA”), which became effective in 2020. The CCPA requires covered companies to provide California consumers with disclosures and expands the rights afforded consumers regarding their data. Fines for noncompliance of the CCPA can be as high as $8 thousand per violation. Since the CCPA was enacted, Nevada and Maine have enacted similar legislation designed to protect the personal information of consumers and penalize companies that fail to comply, and other states have proposed similar legislation. The costs of compliance with, and other burdens imposed by, the GDPR, CCPA, and similar laws may limit the use and adoption of our products and services and/or require us to incur substantial compliance costs, which could have a material adverse impact on our business.
We rely on the services of third-party data center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.
We utilize cloud computing technology. It is hosted pursuant to agreements on technology platforms by third-party service providers. We do not control the operation of these providers or their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation. Further, any damage to, or failure of, the cloud services we use could result in interruptions in our services. Interruptions in our service may damage our reputation, reduce our revenue, cause customers to terminate their agreements and adversely affect our ability to attract new customers. While we believe our strong partnerships reduce our risk, our business would be harmed if our customers and potential customers believe our services are unreliable. Additionally, if our service providers fail to meet their obligations, provide poor, inaccurate or untimely service, or we are unable to make alternative arrangements for these services, we may fail, in turn, to provide our services or to meet our obligations to our users, and our business, financial condition and operating results could be materially and adversely affected.
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Fluctuations in labor costs, changes in the availability of key suppliers, or catastrophic events may increase the cost of our products and services.
Increases in labor costs might be difficult to pass on to our customers. In our Authentication segment security pigments, and ink canisters are key elements in the cost of our products. Our inability to offset material price inflation could adversely affect our results of operations. We rely on one global carrier for transportation services, one supplier to procure our raw materials, one strategic partner to produce our ink canisters, and it is difficult to predict what effects shortages or price increases for the raw materials we use to make our products may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our supplier’s inability to scale production and adjust delivery during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.
Our ability to become profitable is largely dependent upon our ability to continually improve our platforms and acquiring new customers in increasingly competitive markets.
Our ability to become profitable depends upon a number of factors, including our ability to (i) identify and evolve with emerging technological and broader industry trends, (ii) develop and maintain competitive products, (iii) defend our market share against an ever-expanding number of competitors including many new and non-traditional competitors, (iv) enhance our products by adding innovative features that differentiate our products from those of our competitors and prevent commoditization of our products, (v) develop, manufacture and bring compelling new products to market quickly and cost-effectively, (vi) monitor disruptive technologies and business models, (vii) achieve sufficient return on investment for new products introduced based on capital expenditures and research and development spending, (viii) respond to changes in overall trends related to end market demand, (ix) leverage our strategic partnerships to develop and commercialize new and existing products and (x) attract, develop and retain individuals with the requisite skill, expertise and understanding of customers’ needs to develop new technologies and introduce new products and sell our current products. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely affect our competitive standing and prospects.
The expenses or losses associated with lack of widespread market acceptance of our solutions may harm our business, operating results and financial condition.
Rapid technological changes and frequent new product introductions are typical in the markets we serve. Our future success will depend in part on continuous, timely development and introduction of new products that address evolving market requirements. To the extent we fail to introduce new and innovative products, we may lose any market share we have to our competitors, which may be difficult or impossible to regain. Any inability, for technological or other reasons, to successfully develop and introduce new products could harm our business. Additionally, we may experience delays in the development and introduction of products, we may be unable to keep pace with the rapid rate of change in anti-counterfeiting and security products’ research, and any new products acquired or developed by us may not meet the requirements of the marketplace or achieve market acceptance. If we are unable to develop new products to meet market demands, our business could be materially adversely affected.
Risks Relating to our Common Stock
Upon exercise of our outstanding options or warrants, conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, and vesting of our restricted stock units, we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present shareholders.
We are obligated to issue additional shares of our common stock in connection with our outstanding options, warrants and shares of our Series B Convertible Preferred Stock. For the years ended December 31, 2024, there were approximately 7,971,000 anti-dilutive shares consisting 1,606,000 unvested performance restricted stock units, 414,000 restricted stock units and restricted stock awards, 221,000 shares issuable upon exercise of stock options, 4,629,000 shares issuable upon exercise of warrants, 957,000 shares issuable upon conversion of convertible debt, and 144,000 shares issuable upon conversion of preferred stock. The exercise, conversion or exchange of warrants or convertible securities, including for other securities, will cause us to issue additional shares of our common stock and will dilute the percentage ownership of our shareholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such exchange.
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Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
Sales of large blocks of our common stock could depress the price of our common stock. The existence of these shares and shares of common stock issuable upon conversion of outstanding shares of Series B Convertible Preferred Stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholders and investors seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.
Our common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock.
Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.
Because we may issue preferred stock without the approval of our shareholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.
In general, our Board of Directors may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for shareholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.
Because we do not intend to pay cash dividends on our shares of common stock, any returns will be limited to the value of our shares.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to shareholders will therefore be limited to the increase, if any, of our share price.
There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market, a failure of which could result in a de-listing of our common stock and certain warrants.
The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq Capital Market. In addition, to maintain a listing on the Nasdaq Capital Market, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.
Provisions of our publicly traded warrants could discourage an acquisition of us by a third party. In addition to certain provisions of our amended and restated articles of incorporation, as amended, and our amended and restated by-laws, certain provisions of our outstanding warrants could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
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Risks Relating to our Debt
If we do not timely pay amounts due and comply with the covenants under our debt facilities, our business, financial condition and results of operations may be adversely impacted.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have a facility with PNC Bank National Association (the “PNC Facility”), which 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 PNC Facility place encumbrances on our assets, and subject us to restrictive covenants that limit our operating flexibility.
In the event of a continuing default, our senior secured lenders would have the right to accelerate the then-outstanding amounts under the PNC Facility and to exercise their respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and the assets of our PeriShip Global subsidiary. Any continuing default on the PNC Facility could result in the outstanding principal balance under the facility becoming immediately due and payable, which could harm our business, financial condition and results of operations and may have a material adverse impact on our business.
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 $1,100 thousand. As of January 21, 2025, $350 thousand was converted to common stock. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. Although we believe the majority of our investors will choose to convert into shares, if this does not occur, this may have a material adverse impact on our cash and as a result, a material adverse impact on our business.
Our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.
We are generally subject to risks associated with debt financing. These risks include: (1) our cash flow may not be sufficient to satisfy required payments of principal and interest; (2) we may not be able to refinance existing indebtedness or the terms of any refinancing may be less favorable to us than the terms of existing debt; (3) debt service obligations could reduce funds available for other uses such as growing our business; (4) any default on our indebtedness could result in acceleration of those obligations and possible loss of assets or capital; and (5) the risk that necessary capital expenditures cannot be financed on favorable terms. Any of these risks could place strains on our cash flows, reduce our ability to grow, and adversely affect our results of operations.
Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition.
Our existing debt agreements contain, and future debt agreements may contain, financial and/or operating covenants including, among other things, certain coverage ratios, as well as limitations on the ability to incur additional secured and unsecured debt, and/or otherwise affect our distribution and operating policies. These covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default. A default under one of our debt agreements could result in a cross-default under other debt agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral, and enforce their respective interests against existing collateral. In the event of a continuing default, our senior secured lenders would have the right to accelerate the then-outstanding amounts under each such facility and to exercise their respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and the assets of our PeriShip Global subsidiary As a result, a default under applicable debt covenants could have an adverse effect on our financial condition or results of operations. These covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our stockholders.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Risk Management and Strategy
We have established controls and procedures designed to ensure prompt escalation of material cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in a timely manner. We intend to continue to review and enhance our incident response and recovery plan for the Company. Our policies require each of our employees to contribute to our data security efforts. We regularly remind employees of the importance of handling and protecting customer and employee data, including through annual privacy and security training to enhance employee awareness of how to detect and respond to cybersecurity threats. Our incident response and recovery plans and policies will address — and guide our employees, management and the Board on our response to a cybersecurity incident.
Governance
ITEM 2. PROPERTIES.
We do not own any significant real property, but our subsidiary leases approximately 2,686 square feet of primarily office space in Connecticut used in connection with our Precision Logistics segment. The lease expires in 2027. We believe that our property has been well maintained, is suitable and adequate for us to operate and upon expiration of this lease, we do not anticipate any difficulty in obtaining renewals or an alternative space.
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ITEM 3. LEGAL PROCEEDINGS.
From time-to-time, we may be a party to, or otherwise involved in, legal proceedings arising in the ordinary course of business. As of the date of this report, we are not aware of any proceedings, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock, par value $0.001 per share, and certain warrants to purchase common stock are traded on The Nasdaq Capital Market under the trading symbols “VRME” and “VRMEW,” respectively.
Common Shareholders
As of February 27, 2025, we had approximately 1,441 shareholders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, this number is not indicative of the total number of shareholders represented by these shareholders of record.
Dividends
We have never declared or paid a cash dividend. At this time, we do not anticipate paying dividends in the foreseeable future. The declaration and payment of dividends is subject to the discretion of Board and will depend upon our earnings (if any), our financial condition, and our capital requirements. Nevada law permits a corporation to pay dividends out of earnings or surplus.
Unregistered Sale of Equity Securities
On December 31, 2024, 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.
Share Repurchase Plan
The following table provides information about our share repurchase activity for the three months ended December 31, 2024
ISSUER PURCHASES OF EQUITY SECURITIES
| Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Units) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) (In thousands) | |||||||||||||
| 10/01/2024-10/31/2024 | - | $ | - | - | $ | 500 | |||||||||||
| 11/01/2024-11/30/2024 | 20,100 | 0.82 | 20,100 | 483 | |||||||||||||
| 12/01/2024-12/31/2024 | - | - | - | 483 | |||||||||||||
| Total | 20,100 | $ | 0.82 | 20,100 | $ | 483 | |||||||||||
| (1) | Effective December 6, 2023, the Company’s Board of Directors approved a new share repurchase program to allow the Company to spend up to $0.5 million to repurchase shares of its common stock, so long as the price does not exceed $1.00 until December 14, 2024. On November 20, 2024, the Company’s Board of Directors approved to extend the share repurchase authorization through December 31, 2025. |
ITEM 6. [RESERVED.]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management’s Discussion and Analysis of Financial Condition and Results of Operation and other parts of this Report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Report are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors. The following should be read in conjunction with our annual financial statements contained elsewhere in this Report.
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VerifyMe, Inc. (“VerifyMe,” the “Company,” “we,” “us,” or “our”), is a specialized 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. |
| · | 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.
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Opportunities
Precision Logistics: 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.
Authentication: We believe the products in our Authentication segment have applications in many areas. Currently, we are marketing opportunities in the areas of preventing counterfeit and protecting customer brands.
Results of Operations
Comparison of the Years Ended December 31, 2024, and 2023
The following discussion analyzes our results of operations for the years ended December 31, 2024, and 2023. The following information should be considered together with our financial statements for such periods and the accompanying notes thereto.
Revenue
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (In thousands) | (In thousands) | |||||||
| Precision Logistics | $ | 23,766 | 24,652 | |||||
| Authentication | 441 | 661 | ||||||
| Total Revenue | $ | 24,207 | $ | 25,313 | ||||
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Consolidated revenue for the year ended December 31, 2024, was $24,207 thousand, a 4% decrease compared to $25,313 thousand, for the year ended December 31, 2023. The decrease in our Precision Logistics segment primarily relates to a discontinued contract with one customer in our Premium services. In addition, with Thanksgiving arriving later than usual in 2024, there were fewer days from Black Friday to December 31, making this the shortest peak season since 2019. The Authentication segment did not grow during 2024 and we divested Trust Codes Global on December 8, 2024.
Gross Profit
| Years Ended December 31, |
||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| (In thousands) | % of Revenue | (In thousands) | % of Revenue | |||||||||||||
| Precision Logistics | 8,268 | 35 | % | 7,504 | 30 | % | ||||||||||
| Authentication | 394 | 89 | % | 522 | 79 | % | ||||||||||
| Total Gross Profit | $ | 8,662 | 36 | % | $ | 8,026 | 32 | % | ||||||||
Consolidated gross profit for the years ended December 31, 2024, and 2023, was $8,662 thousand and 8,026 thousand, respectively. The resulting gross margin was 36% for the year ended December 31, 2024, compared to 32% for the year ended December 31, 2023. The gross profit increase relates to the process improvements to increase Proactive services margins in the Precision Logistics segment.
Segment Management and Technology
Segment management and technology expenses increased by $357 thousand to $5,454 thousand for the year ended December 31, 2024, compared to $5,097 thousand for the year ended December 31, 2023. The increase relates primarily to the acquisition of Trust Codes Global in March 2023, lower capitalized labor costs and severance expense of $163 thousand in 2024. Amortization and depreciation expense was $1,212 thousand for the year ended December 31, 2024, compared to $1,134 thousand for the year ended December 31, 2023.
General and Administrative Expenses
General and administrative expenses decreased by $564 thousand to $3,852 thousand for the year ended December 31, 2024, compared to $4,416 thousand for the year ended December 31, 2023. The decrease relates primarily to the deal costs related to the acquisition of the Trust Codes Global business of $278 thousand, and higher severance expense in 2023.
Research and Development
Research and development expenses were $70 thousand for the year ended December 31, 2024, compared to $107 thousand for the year ended December 31, 2023, primarily due to fewer projects in the Authentication segment in 2024.
Sales and Marketing
Sales and marketing expenses decreased by $283 thousand to $1,361 thousand for the year ended December 31, 2024, compared to $1,644 thousand for the year ended December 31, 2023. The decrease is primarily related to a reduction in employees and consultants in the Authentication segment, a reduction in stock compensation in Precision Logistics, partially offset by an increase in employees in Precision Logistics.
Goodwill and Intangible Asset Impairment
As a result of a long-lived asset and goodwill asset impairment assessment performed in 2024, intangible asset impairment charges of $964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the year ended December 31, 2024, which primarily represents the amount by which the net carrying value in the Authentication segment exceeded the fair value of the segment, primary due to changes to the forecasted cashflows of the segment. On December 8, 2024, we divested our Trust Codes business in the Authentication segment.
Interest Expense, net
Interest expense, net was $130 thousand for the year ended December 31, 2024, compared to $161 thousand for the year ended December 31, 2023.
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Net Loss
Consolidated net loss for the year ended December 31, 2024, and 2023 was $3,824 thousand and $3,390 thousand, respectively. The increased loss was primarily related to the goodwill and intangible asset impairment noted above partially offset by a gain in contingent consideration of $844 thousand and improvement in gross profit. The resulting consolidated loss per share for the year ended December 31, 2024, and year ended December 31, 2023, was $0.37 and $0.35 per diluted share, respectively.
Liquidity and Capital Resources
Our operations provided $871 thousand of cash during the year ended December 31, 2024, compared to $244 thousand cash during the year end December 31, 2023. The increase in cash from operations is primarily due to the non-cash addbacks to net loss.
Net cash used in investing activities was $575 thousand for the year ended December 31, 2024, compared to $1,195 thousand for the year ended December 31, 2023. The decrease in spending in investing activities related to a decrease in capitalized software costs and the acquisition of the Trust Codes Global business in March 2023.
Net cash used in financing activities for the year ended December 31, 2024, was $616 thousand primarily related to repayments toward the PNC Facility, compared to cash provided by financing activities of $634 thousand for the year ended December 31, 2023, primarily related to proceeds from the PNC Facility and issuance of convertible debt in 2023 offset by repayments towards the PNC Facility.
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.
On November 26, 2024, we announced an extension of the $0.5 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. During the year ended December 31, 2024, the Company repurchased 21,100 shares of common stock for $18 thousand under the program.
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 $1,100 thousand of which $475 thousand was purchased by relating parties including certain members of management and the Board of Directors. As of December 31, 2024, $450 thousand was held by related parties after one member of management left the Company. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February 25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. As of December 31, 2024, the amount outstanding on the convertible debt was $1,100 thousand and included in Convertible Note, and Convertible Note – related party on the accompanying Consolidated Balance Sheets. The Company has accrued interest expense of $31 thousand related to the convertible note as of December 31, 2024. As of January 21, 2025, $350 thousand was converted to common stock.
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 December 31, 2024, $0 was outstanding on the RLOC.
The PNC Facility also included a four-year Term Note for $2 million which had a maturity date of September 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%. As of December 31, 2024, our short-term debt outstanding under the Term Note was $500 thousand and total long-term debt outstanding under the Term Note was $375 thousand. During the year ended December 31, 2024, the Company made a repayment of $500 thousand towards the principal of the outstanding Term Note. As of January 21, 2025, the Term Note was paid in full and no future principal payments are due.
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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. We entered into a waiver and amendment on August 14, 2024 which provided a waiver for a certain event of default and extended the RLOC to September 30, 2025.
We were not in compliance with all affirmative and restrictive covenants under the PNC Facility at December 31, 2024. On February 28, 2025, we received a waiver as of December 31, 2024, for certain events of default.
Effective October 17, 2022, we entered into an interest rate swap agreement, with a notional amount of $1,958 thousand, effectively fixing the interest rate on our outstanding debt at 7.602%. As of January 21, 2025, we terminated our interest rate swap agreement.
We believe that our cash and cash equivalents, together with the proceeds from the convertible notes, warrant inducement, share repurchase program, and the amount available on the RLOC, will fund our operations for the next 12 months including expected capital expenditures.
We expect to grow our business organically and through key acquisitions that will help accelerate the growth of our business. We expect to continue to fund our operations primarily through utilization of our current financial resources and future revenue and may issue additional debt or equity.
Critical Accounting Policies and Estimates
Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management. We have identified that the estimates used in the valuation of the assets of the Trust Codes acquisition in March 2023, are critical and require significant judgment. We believe estimates and assumptions related to these accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial position, results of operations or cash flows.
Revenue Recognition
We recognize revenue based on the principals established in the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Revenue recognition is made when our performance obligation is satisfied at a point in time of delivery of the service. Over 95% of our revenue is derived from logistics management for time and temperature sensitive packages with the remaining from our brand protection solutions. Our terms vary based on the solutions we offer and are examined on a case-by-case basis. For licensing our VerifyInkTM technology we depend on the integrity of our clients’ reporting. Determining whether products and services in agreements with non-standard terms are distinct performance obligations that should be accounted for separately or combined to one unit of accounting may require significant judgement.
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, and unbilled revenue when billings occur after the end of the month (contract assets) on the consolidated balance sheets. Amounts charged to our clients become billable when the performance obligation has been met at a point in time. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. These assets are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract assets have not significantly changed as of December 31, 2024. No other factors materially impacted the balances.
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Business Combinations
Accounting for business combinations requires management to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the acquisition date. Although we believe the assumptions and estimates we have made in relation to the acquisitions are appropriate, they are based, in part, on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain acquired intangible assets include, but are not limited to, future expected cash flows including revenue growth rate assumptions from product sales, customer contracts and acquired technologies, estimated royalty rates used in valuing technology related intangible assets, and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital (“WACC”) analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.
We allocate the fair value of the purchase price of our Trust Codes acquisition, to the tangible assets acquired, liabilities assumed, and intangible assets acquired, based on their estimated fair values at acquisition date. The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which will not exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the conclusion of the measurement period or final determination of the fair value of the purchase price of our acquisitions, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Operations.
Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
Goodwill
We have recorded goodwill as part of our acquisitions, which represents the excess of purchase price over the fair value of net assets acquired in the business combinations. Pursuant to ASC Topic 350, Intangibles—Goodwill and Other, the Company will test 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.
On September 24, 2024, Paul Ryan, former Executive Vice President, Authentication Segment, notified us of his resignation. During the third quarter of fiscal year ended December 31, 2024, we identified concerns relating to the commercial viability of the Authentication segment. As a result, the Company made revisions to our internal forecasts and concluded that in accordance with ASC Topic 350 a triggering event occurred indicating that potential impairment exists, which required the Company to conduct an interim test of the fair value of the goodwill for the Authentication segment. We performed a quantitative goodwill impairment test and determined the fair value of our reporting units using a combination of an income approach, employing a discounted cashflow model, and a market approach, employing a guideline public company approach. The results of our goodwill impairment test indicated that the carrying value of the Authentication reporting unit exceeded its estimated fair value. As a result, the Company recorded a goodwill impairment charge of $1,351 thousand during the year ended December 31, 2024, within goodwill and intangible asset impairment on the consolidated statement of operations. On December 8, 2024 we divested the Trust Codes business in the Authentication segment.
Stock-based Compensation
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.
For RSUs 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 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.
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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.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required to be filed pursuant to this Item 8 are appended to this Report beginning on page F-1 located immediately after the signature page and incorporated by reference in this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Conclusion Regarding the Effectiveness 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 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 December 31, 2024. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2024, 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) Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive and principal financial officers, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, using criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our management has concluded that our internal controls over financial reporting was effective as of December 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the three months ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Auditor’s Report on Internal Control Over Financial Reporting
This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Report.
ITEM 9B. OTHER INFORMATION.
During the three months ended December 31, 2024, no director or officer
of the Company
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not Applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Adam H Stedham, age 56, has served as one of our directors since April 2022. Mr. Stedham has served as our Chief Executive Officer since June 2023 and as our President since August 2023. Mr. Stedham was a senior executive of Learning Technologies Group plc and was CEO of GP Strategies from June 2020 until June 2023. He also served as President of GP Strategies from November 2017 to October 2021. Mr. Stedham joined GP Strategies in 1997, after 6 years as a nuclear reactor operator in the US Navy. He has held roles of increasing responsibility during his tenure, including leading operational service lines, directing acquisitions and divestitures, heading business development, and managing the Asia-Pacific region. He was on the board of directors of GP Strategies from June 2020 until June 2023. Mr. Stedham has significant expertise in business strategy, mergers and acquisitions, learning and performance innovation, global operations, and strategic relationship management. He holds a Master of Business Administration from Anderson University, Master’s of Education from University of Pennsylvania, and Master’s in Adult & Community Education from Ball State University. Mr. Stedham’s prior experience as the chief executive officer and president of a public company gives him the qualifications, skills to serve on our Board.
Marshall Geller, age 86, has served as one of our directors since July 2017. Mr. Geller was a director and a member of the audit committee of GP Strategies Corporation (formerly NYSE:GPX) from 2002 until October 2021. Mr. Geller was a director of Wright Investors’ Service Holdings Inc. (OTCMKT:WISH), formerly National Patent Development Corporation, from January 2015 until October 2018. Mr. Geller was a director and member of the audit committee of G3 VRM Acquisition Corp. (Nasdaq:GGGV) from June 2021 until July 2022. He is currently a Director of Easy Smart Pay, a public-private partnership of the California State Association of Counties Finance Corporation. Mr. Geller formerly served as a director of California Pizza Kitchen, Inc., (formerly Nasdaq:CPKI) from 2008 until 2011, and Hexcel Corporation (NYSE:HXL) from 1994 until 2003. Mr. Geller was a founder of St. Cloud Capital, a Los Angeles based private equity fund, and Senior Investment Advisor from December 2001 until September 2017. He has spent more than 50 years in corporate finance and investment banking, including 21 years as a Senior Managing Partner of Bear, Stearns & Co., with oversight of all operations in Los Angeles, San Francisco, Chicago, Hong Kong and the Far East. Mr. Geller is currently on the board of directors of UCLA Health System and on the Board of Governors of Cedars Sinai Medical Center, Los Angeles. Mr. Geller also serves on the Dean’s Advisory Council for the College of Business & Economics at California State University, Los Angeles. Mr. Geller’s financial and business experience, including as a managing partner of a private equity fund, and his many years of experience and expertise as an investor in and adviser to companies in various sectors as well as his experience with serving on the boards of directors of other public and private corporations give him the qualifications, skills and financial expertise to serve on our Board.
Howard Goldberg, age 79, has served as one of our directors since July 2017. Mr. Goldberg has served as our Lead Independent director since 2020, having served from time to time in that capacity. From 2003 through 2005, Mr. Goldberg served as a part-time consultant to Laser Lock Technologies, Inc., the predecessor to VerifyMe, and provided consulting service to us again from 2016 through December 2017. Mr. Goldberg has been a private investor in both real estate and start-up companies and has provided consulting services to start-up companies since 1999. From 1994 through 1998, Mr. Goldberg served as President, CEO and board member of Player’s International, a publicly traded company in the gaming business prior to its sale to Harrah’s Entertainment Inc. Mr. Goldberg served on the board of directors and Audit Committee of Imall Inc., a publicly traded company that provided on-line shopping prior to its sale to Excite-at-Home. Mr. Goldberg served as a member of the Board of Trustees of Winthrop Realty Trust, a publicly traded real estate investment trust, from December 2003 to August 2016 when Winthrop’s assets were transferred to a liquidating trust. Mr. Goldberg was a member of Winthrop’s Audit Committee and Nominating and Corporate Governance Committee and was its lead independent trustee. Mr. Goldberg served as a trustee for Winthrop Realty Liquidating Trust until December 2019 when it was finally liquidated. Mr. Goldberg was a director of New York REIT, Inc. from March 2017 until October 2018, when it converted to a limited liability company called New York REIT LLC. Mr. Goldberg was a manager of New York REIT LLC from October 2018 until November 2022. Mr. Goldberg has a law degree from New York University and was previously the managing partner of a New Jersey law firm where he specialized in gaming regulatory law and real estate from 1970 through 1994. Mr. Goldberg’s experience as a director of other public companies and his legal expertise gives him the qualifications, skills and financial expertise to serve on our Board.
Scott Greenberg, age 68, has served as one of our directors since November 2019. Mr. Greenberg served as our Interim Chief Executive Officer from March 15, 2023 to June 19, 2023 and Executive Chairman from April 7, 2022 to June 19, 2023. Mr. Greenberg served as the Chairman of the board of directors of GP Strategies Corporation (NYSE:GPX) from August 2018 until October 2021 when it was acquired by Learning Technologies Group. He previously served as Chief Executive Officer of GP Strategies from April 2005 until July 2020. He was also the President of GP Strategies from 2001 to 2006, Chief Financial Officer from 1989 until 2005, Executive Vice President from 1998 to 2001, Vice President from 1985 to 1998, and held various other positions with GP Strategies since 1981. Mr. Greenberg was also a Director of Wright Investors’ Service Holdings, Inc. (OTCMKT:WISH), formerly National Patent Development Corporation, from 2004 to 2015. Mr. Greenberg’s significant experience and expertise in management, acquisitions and strategic planning, as well as many years of finance and related transactional experience give him the qualifications, skills and financial expertise to serve on our Board.
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Arthur Laffer, age 84, has served as one of our directors since March 2019. Dr. Laffer is the founder and chairman of Laffer Associates, an institutional economic research and consulting firm. Dr. Laffer has served as a director of NexPoint Residential Trust Inc. (NYSE:NXRT) since May 2015, NexPoint Real Estate Finance Inc. (NYSE:NREF) since February 2020, Melt Pharmaceuticals, Inc., a private company, since February 2022, and NexPoint Diversified Real Estate Trust (NYSE:NXDT) since July 2022. He was a director of EVO Transportation & Energy Services, Inc. (OTCPINK:EVOA) from August 2018 to December 2019 and the GEE Group Inc. (NYSE American:JOB) from January 2015 to March 2020. Dr. Laffer’s economic acumen and influence in triggering a world-wide tax-cutting movement in the 1980s have earned him the distinction in many publications as “The Father of Supply-Side Economics.” Dr. Laffer was a member of President Reagan’s Economic Policy Advisory Board for both of his two terms (1981-1989). Dr. Laffer also advised Prime Minister Margaret Thatcher on fiscal policy in the UK during the 1980s. In the early 1970s, Dr. Laffer was the first to hold the title of Chief Economist at the Office of Management and Budget under George Shultz. Additionally, Dr. Laffer served as Charles B. Thornton Professor of Business Economics at the University of Southern California and as Associate Professor of Business Economics at the University of Chicago. In June 2019, Dr. Laffer received the Presidential Medal of Freedom. Dr. Laffer’s expertise in economics and his experience as a director of multiple companies give him the qualifications, skills and financial expertise to serve on our Board.
David Edmonds, age 67, has served as one of our directors since June 2023. Mr. Edmonds has served as a member of the board of directors of our wholly owned subsidiary PeriShip Global LLC since June 2022. Prior to this he served as the Senior Vice President, Worldwide Services at FedEx from April 2001 until his retirement in December 2020. Prior to that, Mr. Edmonds was actively involved in the merger between Caliber System (FedEx Ground's former parent company) and FedEx Corporation and was responsible for bringing the two companies together to compete collectively under the new FedEx Corporation umbrella. Mr. Edmonds worked his entire 41-year career in the transportation and logistics field. He is a graduate of Kent State University, is a member of the American Management Association; the Council for Logistics Management; and the Sales and Marketing Executive Council of the Advisory Board. Mr. Edmond’s experience with the transportation and logistics field and network of relationships which we believe are valuable assets to the Company and its growth give him the qualifications, skills and financial expertise to serve on our Board.
Management and Executive Officers
We are currently served by four executive officers, Messrs. Stedman, Volk, and Wang and Ms. Meyers.
Adam Stedham, age 56, is our Chief Executive Officer and President, and a member of our Board of Directors. Additional information about Mr. Stedham can be found under “Directors,” above.
Nancy Meyers, age 55, has served as the Company’s Chief Financial Officer and Executive Vice President since August 2023 and was the Company’s Senior Vice President of Finance and Investor Relations from February 2022 until July 2023. Prior to joining the Company in September 2021, Ms. Meyers had several accounting and financial reporting roles at GP Strategies Corporation, ultimately serving as Manager of Financial Reporting from October 2017 until May 2021. Ms. Meyers is a Chartered Professional Accountant (CPA) and brings over 25 years of experience in finance, accounting, and operations.
Fred G. Volk, III, age 57, has been the Vice President, Operations of the Company’s wholly owned subsidiary PeriShip Global, LLC since April 2022. Prior to this Mr. Volk served as Vice President of Operations of PeriShip, LLC from September 2001 until April 2022. Mr. Volk has over 22 years of supply chain expertise, which includes many years at FedEx®. Throughout his tenure there, he worked in multiple leadership positions across the Transportation, Logistics, and Customer Service spaces, allowing him to become intimately familiar with the principles required for operational effectiveness. With later experiences in leadership positions at various local law enforcement agencies, Mr. Volk’s acumen spans from supply chain management to compliance, and beyond.
Jack Wang, age 65, has served as the Company’s Chief Information Officer and Senior Vice President of Technology since August 2023 and has been the Chief Information Officer of the Company’s wholly owned subsidiary PeriShip Global, LLC since April 2022. Prior to this Mr. Wang served as Chief Information Officer of PeriShip, LLC from December 2011 to 2016 and from 2018 until April 2022. From 2016 to 2018 Mr. Wang served as Chief Information Officer for IMEX Global Solutions, an international logistics company that distributes parcels, publication and business mail worldwide. Prior to joining PeriShip, Mr. Wang served as the head of IT operations and development at the Package Portfolio division of United Parcel Service. At UPS, Mr. Wang managed IT services for worldwide package operations. Before UPS, Mr. Wang was the managing director of Continental Airlines, where he was responsible for strategic system architecture and development as well as providing IT services for many of the airline's customer facing systems. Many of the core systems that Mr. Wang instituted at Continental Airlines were eventually selected as the baseline systems for the new United Airlines. Mr. Wang holds a Master's degree in Computer Science from State University of New York at New Paltz.
Family Relationships
There are no family relationships between any of our directors or executive officers.
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Corporate Governance
Director Independence
The listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) require that a majority of our Board be independent. No director will qualify as independent unless the board affirmatively determines that the director has no relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Based upon the Nasdaq listing standards and applicable SEC rules and regulations, our board has determined that each of Scott Greenberg, Marshall Geller, Howard Goldberg, Dr. Arthur Laffer, and David Edmonds are independent. Adam Stedham our Chief Executive Officer is not an independent director.
Board Leadership Structure
Although the board has not adopted a formal policy regarding the separation of the roles of the Chairman and the Chief Executive Officer, we believe that our corporate governance is most effective when these positions are not held by the same person. The board recognizes the differences between the two roles and believes that separating them allows each person to focus on his individual responsibilities. Under this leadership structure, our Chief Executive Officer can focus his attention on generating sales, overseeing sales and marketing, and managing the day-to-day company operations, while our Chairman can focus his attention on board responsibilities.
Depending on the circumstances, other leadership models, such as combining the role of Chairman with the role of Chief Executive Officer, might be appropriate. For example, Patrick White served as our Chief Executive Officer and as a director of the Company until March 14, 2023 at which time the board appointed Scott Greenberg to serve as the Interim Chief Executive Officer in addition to his position as Executive Chairman. Accordingly, the positions of Chief Executive Officer and Executive Chairman were combined on an interim basis. Mr. Greenberg served as both our Executive Chairman from April 7, 2022 to June 19, 2023 and Interim CEO from March 2023 to June 19, 2023 when Adam Stedham was appointed as our Chief Executive Officer, at which time Mr. Greenberg continued as our non-executive Chairman. Our Board intends to periodically review our leadership structure.
Non-Executive Vice Chairman and Lead Independent Director
In addition to a non-executive Chairman, we have appointed Marshall Geller to serve as our non-executive Vice Chairman of our board. The Board has also appointed a lead independent director, currently Howard Goldberg, in order to promote independent leadership of the board. Our non-executive vice chairman or lead independent director preside over the executive sessions of the independent directors. Our lead independent director chairs board meetings in the non-executive Vice Chairman’s absence and is available to engage directly with major stockholders where appropriate. The guidance and direction provided by the lead independent director reinforce the board’s independent oversight of management and contribute to communication among members of the Board.
Board Committees
The Board has established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee Executive Committee, and Mergers & Acquisitions Committee. Each committee acts pursuant to a written charter adopted by our Board. The current charters for each board committee are available on our website, www.verifyme.com under the heading, “Investor Hub” and the subheading, “Corporate Governance.”
Audit Committee
The Audit Committee monitors the integrity of our financial statements, monitors the independent registered public accounting firm’s qualifications and independence, monitors the performance of our internal audit function and the auditors, and monitors our compliance with legal and regulatory requirements. The Audit Committee has the sole authority and responsibility to select, evaluate and engage independent auditors for the Company. The Audit Committee reviews with the auditors and with the Company’s financial management our annual and interim financial statements and all matters relating to the annual audit of the Company. The Audit Committee also prepares the audit committee report that the SEC requires to be included in our annual proxy statement.
The Audit Committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board has determined that each member of the Audit Committee meets the independence and financial literacy requirements applicable to audit committee members under the Nasdaq listing standards and SEC rules. The Board has further determined that Mr. Geller qualifies as an “Audit Committee Financial Expert” in accordance with the applicable rules and regulations of the SEC.
Compensation Committee
The Compensation Committee reviews, recommends and approves salaries and other compensation of the Company’s executive officers, and administers the Company’s equity incentive plans (including reviewing, recommending and approving stock option and other equity incentive grants to executive officers).
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The Compensation Committee meets in executive session to determine the compensation of the Chief Executive Officer of the Company. In determining the amount, form, and terms of such compensation, the committee considers the annual performance evaluation of the Chief Executive Officer conducted by the board in light of our goals and objectives relevant to Chief Executive Officer compensation, competitive market data pertaining to Chief Executive Officer compensation at comparable companies, and such other factors as it deems relevant, and is guided by, and seeks to promote, the best interests of the Company and its stockholders.
In addition, subject to existing agreements, the Compensation Committee determines the salaries, bonuses, and other matters relating to compensation of the executive officers of the Company using similar parameters. It sets performance targets for determining periodic bonuses payable to executive officers. It also reviews and makes recommendations to the board regarding executive and employee compensation and benefit plans and programs generally, including employee bonus and retirement plans and programs (except to the extent specifically delegated to a board appointed committee with authority to administer a particular plan). In addition, the Compensation Committee approves the compensation of non-employee directors and reports it to the full board.
The Compensation Committee also reviews and makes recommendations with respect to stockholder proposals related to compensation matters. The committee administers the Company’s equity incentive plans, including the review and grant of stock options and other equity incentive grants to executive officers and other employees and consultants.
The Compensation Committee may, in its sole discretion and at the Company’s cost, retain or obtain the advice of a compensation consultant, legal counsel or other adviser. The committee is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the committee.
The Board has determined that each member of the Compensation Committee meets the independence requirements applicable to compensation committee members under the Nasdaq listing standards.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee identifies individuals qualified to become members of the board, consistent with criteria approved by the board; recommends to the board the director nominees for the next annual meeting of stockholders or special meeting of stockholders at which directors are to be elected; recommends to the board candidates to fill any vacancies on the board; develops, recommends to the board, and reviews the corporate governance guidelines applicable to the Company; and oversees the evaluation of the board and management.
In recommending director nominees for the next annual meeting of stockholders, the Nominating and Corporate Governance Committee ensures the Company complies with its contractual obligations, if any, governing the nomination of directors. It considers and recruits candidates to fill positions on the board, including as a result of the removal, resignation or retirement of any director, an increase in the size of the board or otherwise. The committee conducts, subject to applicable law, any and all inquiries into the background and qualifications of any candidate for the board and such candidate’s compliance with the independence and other qualification requirements established by the committee. The committee also recommends candidates to fill positions on committees of the board.
In selecting and recommending candidates for election to the board or appointment to any committee of the board, the Nominating and Corporate Governance Committee does not believe that it is appropriate to select nominees through mechanical application of specified criteria. Rather, the committee shall consider such factors at it deems appropriate, including, without limitation, the following: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly-held company; experience in the Company’s industry; experience as a board member of another publicly-held company; diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to other directors of the Company; practical and mature business judgment; and composition of the board (including its size and structure).
The Nominating and Corporate Governance Committee develops and recommends to the board a policy regarding the consideration of director candidates recommended by the Company’s stockholders and procedures for submission by stockholders of director nominee recommendations.
In appropriate circumstances, the Nominating and Corporate Governance Committee, in its discretion, will consider and may recommend the removal of a director, in accordance with the applicable provisions of our Amended and Restated Articles of Incorporation and Bylaws. If we are subject to a binding obligation that requires director removal structure inconsistent with the foregoing, then the removal of a director shall be governed by such instrument.
The Nominating and Corporate Governance Committee oversees the evaluation of the board and management. It also develops and recommends to the board a set of corporate governance guidelines applicable to us, which the committee shall periodically review and revise as appropriate. In discharging its oversight role, the committee is empowered to investigate any matter brought to its attention.
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The Board has determined that each member of the Nominating and Corporate Governance Committee meets the director independence requirements of the Nasdaq listing standards.
Executive Committee
The Executive Committee acts on behalf of the board between regularly scheduled board meetings, and subject to certain limitations imposed by applicable legal or regulatory requirements, may exercise during such intervals, all of the powers of the board in the management of the business, affairs and property of our Company other than: (i) the filling of vacancies on the board; (ii) approving or adopting, or recommending to the shareholders, any action or matter; (iii) adopting, amending or repealing the Amended and Restated Bylaws; and (iv) those matters that are specifically delegated to other committees of the board or that are under active review by the board or a board committee, unless the board specifically determines otherwise.
Mergers & Acquisitions Committee
The Mergers & Acquisitions Committee is empowered to review and assess, and assist the board in reviewing and assessing, potential mergers, acquisitions, joint ventures and strategic investments. In addition, the committee is empowered to assist management in identifying and reviewing merger and acquisition opportunities and is charged with assessing the associated risk to the Company and making recommendations with respect to the terms thereof to the board. The committee is also charged with planning of, and evaluating the execution of, integrations of merger and acquisition transactions.
Role of the Board in Risk Oversight
The Company’s risk management function is overseen by the board. This oversight is conducted in part through the board’s committees. Our Audit Committee focuses on risks associated with financial matters, particularly financial reporting and disclosures, accounting, internal control over financial reporting, financial policies, and compliance with legal and regulatory matters related to accounting and financial reporting. Our Nominating and Corporate Governance Committee focuses on the oversight of risks associated with our corporate governance, including board membership and structure. Our Compensation Committee focuses on the oversight of risks arising from our compensation policies and programs.
While our board committees have certain oversight responsibilities, the full board retains responsibility for monitoring and assessing strategic risk exposure related to cybersecurity risks and general oversight of risk. Our Chairman works closely together with other members of the board when material risks are identified on how to best address such risks. If the identified risk poses an actual or potential conflict with management, our independent directors may conduct the assessment. In addition, our management keeps the board apprised of material risks and provides its directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect us, and how management addresses those risks.
Code of Business Conduct and Ethics
The board has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer. Although not required, the Code of Ethics also applies to our directors. The Code of Ethics provides written standards that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure and compliance with laws, rules and regulations and the prompt reporting of illegal or unethical behavior, and accountability for adherence to the Code of Ethics. The Code of Ethics is available on our website at https://www.vrmeinvestor.com/investors/.
Insider Trading Policy
Anti-Hedging Policy
Our insider trading policy prohibits directors, officers and employees from engaging in transactions that hedge or offset any decrease in the market value of equity securities granted as compensation.
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ITEM 11. EXECUTIVE COMPENSATION.
Executive Compensation
This section contains information about the compensation earned and paid to our named executive officers during fiscal year 2024 and fiscal year ended December 31, 2023 (“fiscal year 2023”), or only fiscal year 2024 if the individual was not a named executive officer for fiscal year 2023. For fiscal year 2024, in accordance with the executive compensation disclosure rules and regulations of the SEC, we determined that the following officers were our named executive officers:
| · | Adam Stedham, Chief Executive Officer and President; |
| · | Fred G. Volk, III, VP of Operations, PeriShip Global; |
| · | Nancy Meyers, Chief Financial Officer; |
| · | Paul Ryan, former Executive Vice President, Authentication Segment; |
| · | Curt Kole, former Executive Vice President, Precision Logistics and Executive Vice President, Global Sales and Strategy, PeriShip Global; |
Summary Compensation Table
The table below summarizes the compensation earned for services rendered to us in all capacities, for the fiscal years indicated, by named executive officers:
Summary Compensation Table
|
Name and Principal Position |
Year |
Salary ($) |
Stock Awards ($)(1) |
All Other Compensation ($)(2) |
Total Compensation ($) |
||||||||||||
| Adam Stedham (3) | 2024 | 285,000 | 12,844 | 14,250 | 312,094 | ||||||||||||
| CEO and President | 2023 | 162,000 | 983,319 | - | 1,145,819 | ||||||||||||
| Fred G Volk, III | 2024 | 190,000 | 81,763 | 9,327 | 281,090 | ||||||||||||
| VP of Operations, PeriShip Global | |||||||||||||||||
| Nancy Meyers | 2024 | 171,000 | 7,706 | 8,550 | 187,256 | ||||||||||||
| CFO | 2023 | 180,000 | 154,900 | 9,000 | 343,900 | ||||||||||||
| Paul Ryan (4) | 2024 | 210,266 | - | 6,308 | 216,574 | ||||||||||||
| Former EVP, Authentication Segment | |||||||||||||||||
| Curt Kole (5) | 2024 | 230,000 | - | 5,854 | 235,854 | ||||||||||||
| Former EVP, Precision Logistics; EVP Global Sales and Strategy, PeriShip Global | 2023 | 230,000 | 129,200 | - | 359,200 | ||||||||||||
| (1) | The amounts shown in this column reflect time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) granted to our named executive officers which are subject to certain vesting terms. The amounts in this column do not reflect the actual value realized by the recipient. Amounts in this column represent the grant date fair value of the awards, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation,” or ASC 718. The assumptions used in calculating the grant date fair value of the awards are set forth Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements. The value of the PSUs are based on the target level of the performance as of the date of grant. For fiscal year 2024, we only granted PSUs to Mr. Volk. If the highest level of performance is achieved, the value of the PSUs for Mr. Volk would be $105,750. |
| (2) | The amounts shown in this column reflect amounts paid by us to or on behalf of each named executive officer for company matching contributions to 401(k) or to New Zealand’s retirement savings scheme, Kiwisaver, as applicable. |
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| (3) | Adam Stedham served as a non-employee director in fiscal year 2023 until June 19, 2023 when he was appointed Chief Executive Officer. Mr. Stedham’s stock awards for fiscal year 2023 include a grant of 34,014 shares of restricted stock for his service as a non-employee director during fiscal year 2023. |
| (4) | Paul Ryan served as our Executive Vice President, Authentication Segment until October 4, 2024. |
| (5) | Curt Kole served as our Executive Vice President of Precision Logistics and as Executive Vice President, Global Sales and Strategy of PeriShip Global until June 4, 2024. |
Employment and Consulting Agreements with Named Executive Officers
Adam Stedham - Chief Executive Officer and President
The Company entered into an employment agreement, dated as of June 19, 2023, with Adam Stedham, the Chief Executive Officer of the Company, with an annual salary of $300,000. In connection with the employment agreement, the board granted Mr. Stedham an annual bonus potential of up to 50% of base salary to be earned based on adjusted EBITDA performance goals to be set annually by the Compensation Committee. On March 12, 2024, the Compensation Committee approved a change to the cash bonus for Mr. Stedham, which if achieved, will be payable at Mr. Stedham’s discretion in either cash or in an amount of the Company’s common stock determined by dividing the cash value of the earned bonus by the 30-day VWAP of the Company’s shares on the day the Board of Directors approves the bonus. Mr. Stedham was also awarded 34,014 shares of restricted stock pursuant to the Company’s stockholder approved equity incentive plan for a half year of service as a non-employee director of the Company. The restricted stock award vested in full on date of grant. Mr. Stedham was awarded 204,082 RSUs pursuant to the Company’s stockholder approved equity incentive plan that vest in three equal annual increments over a three-year vesting term and 550,000 PSUs issued pursuant to the Company’s stockholder approved equity incentive plan based on performance criteria satisfied within 4 years of grant. In the event of Mr. Stedham’s employment is terminated for death or disability, the Company shall pay any accrued but unpaid base salary through the date of termination, accrued but unpaid expenses required to be reimbursed under this agreement and any annual bonus for which the executive completed the appliable calendar performance year but has not yet earned. If Mr. Stedham is terminated by the Company for cause or by the executive without good reason, the executive shall have no right to compensation. If Mr. Stedham is terminated by the Company without cause or by executive for good reason, the executive will be entitled to severance until the conclusion of the Initial term of two years. It will also include the accelerated vesting of RSUs and retention of PSUs for remainder of performance period.
On July 2, 2024, the Company entered into Salary Reduction Agreement with Mr. Stedham, as part of a salary reduction program for certain employees of the Company and its subsidiaries approved by the Compensation Committee of the Company’s Board of Directors. Mr. Stedham will have his annual base salary reduced by ten percent (10%) during the term of the Salary Reduction Agreement. In return for the reduction in his annual base salary, Mr. Stedham will be entitled to receive a grant of restricted stock unit awards (“RSUs”) on July 1, 2024 and each 1st of January thereafter during the term of the Salary Reduction Agreement, each such RSU representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share, subject to the terms of the Company’s 2020 Equity Incentive Plan and form RSU award agreement, with the number of shares underlying the RSU awards to be determined by dividing the projected amount of Mr. Stedham’s base salary reduction for the calendar year, respectively, by $1.60, rounded down to the nearest number of whole shares. Each RSU granted pursuant to the Salary Reduction Agreement vests in full on the 1st of January following its grant date and is payable as soon as reasonably practicable after vesting. The term of the Salary Reduction Agreement is until December 31, 2025. Pursuant to the Salary Reduction Agreement, a pro-rata portion of RSUs granted will vest upon the early termination of the Salary Reduction Agreement, or any termination of the employment of Mr. Stedham except for a termination for cause. Any unvested RSUs will be forfeited in whole by Mr. Stedham in the event he is terminated by the Company for cause.
Fred G Volk, III – VP of Operations, PeriShip Global
On April 22, 2022, the Company’s wholly owned Subsidiary PeriShip Global, entered into an Employment Agreement with Mr. Volk with an initial term of two years, which automatically renews for additional one-year terms until either party gives 60-day notice of non-renewal or otherwise terminated the agreement according to its terms. Under the employment agreement, Mr. Volk is entitled to an annual base salary of $200,000. Additionally, pursuant to the employment agreement, on April 22, 2022, Mr. Volk was awarded PSUs with a grant date value equal to his annual base salary, each such unit representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share, subject to the terms of the 2020 Plan. These PSUs, except as otherwise provided in the award agreement, will vest, subject to continuous employment and other conditions, as follows: 50% if the Company’s common stock price exceeds $5.00 per share for a period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share for a period of 20 consecutive days, in each case prior to the three-year anniversary of the grant date. Pursuant to the employment agreement Mr. Volk will receive a commission of 1.0% on eligible annual sales in excess of $30,000,000. The employment agreement may be terminated by us for cause, by Mr. Volk without good reason, or by delivering a non-renewal notice. If terminated by us without cause or by Mr. Volk with good reason Mr. Volk will be entitled to accrued but unpaid base salary and expenses, a payment equal to 12 months of his then base salary if the Employment Agreement is terminated during the initial two year term or a payment equal to 6 months of his then base salary if the Employment Agreement is terminated after the initial two year term, and six months of benefits. If terminated upon a non-renewal notice, Mr. Volk will be entitled to any accrued and unpaid salary and expenses prior to the effective date of his termination.
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Nancy Meyers – Chief Financial Officer
On February 16, 2022, the Company entered into an Employment Agreement with Ms. Meyers. Under the employment agreement, Ms. Meyers is entitled to an annual base salary of $180,000. Additionally, pursuant to the employment agreement, on February 16, 2022, Ms. Meyers was awarded PSUs with a grant date value equal to 50% of her annual base salary, each such unit representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share, subject to the terms of the 2020 Plan. These PSUs, except as otherwise provided in the award agreement, will vest, subject to continuous employment and other conditions, as follows: 50% if the Company’s common stock price exceeds $5.00 per share for a period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share for a period of 20 consecutive days, in each case prior to the three-year anniversary of the grant date. The employment agreement may be terminated by us for cause, or by Ms. Meyers without good reason. If terminated by us without cause or by Ms. Meyers with good reason Ms. Meyers will be entitled to accrued but unpaid base salary and expenses, a payment equal to 6 months of her base salary and six months of benefits.
On July 2, 2024, the Company entered into Salary Reduction Agreement with Nancy Meyers, the Company’s Chief Financial Officer, as part of a salary reduction program for certain employees of the Company and its subsidiaries approved by the Compensation Committee of the Company’s Board of Directors. Ms. Meyers will have her annual base salary reduced by ten percent (10%) during the term of the Salary Reduction Agreement. In return for the reduction in her annual base salary, Ms. Meyers will be entitled to receive a grant of restricted stock unit awards (“RSUs”) on July 1, 2024 and each 1st of January thereafter during the term of the Salary Reduction Agreement, each such RSU representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share, subject to the terms of the Company’s 2020 Equity Incentive Plan and form RSU award agreement, with the number of shares underlying the RSU awards to be determined by dividing the projected amount of Ms. Meyers base salary reduction for the calendar year, respectively, by $1.60, rounded down to the nearest number of whole shares. Each RSU granted pursuant to the Salary Reduction Agreement vests in full on the 1st of January following its grant date and is payable as soon as reasonably practicable after vesting. The term of the Salary Reduction Agreement is until December 31, 2025. Pursuant to the Salary Reduction Agreement, a pro-rata portion of RSUs granted will vest upon the early termination of the Salary Reduction Agreement, or any termination of the employment of Ms. Meyers except for a termination for cause. Any unvested RSUs will be forfeited in whole by Ms. Meyers in the event she is terminated by the Company for cause.
Paul Ryan – Former Executive Vice President, Authentication Segment
On March 1, 2023, the Company’s wholly owned Subsidiary Trust Codes Global Limited (“Employer”) entered into an Employment Agreement with Mr. Ryan with an initial term of three years, until either party gives 90-day notice of non-renewal or otherwise terminated the agreement according to its terms. Under the employment agreement, Mr. Ryan is entitled to an annual base salary of NZD$160,000 until the first month where Employer breaks even as determined by the Employe, and NZD$320,000 per annum gross thereafter. In August 2023 Mr. Ryan’s salary was increased to NZD$320,000 and reduced by ten percent (10%) with the salary reduction agreement. On September 24, 2024, Mr. Ryan, notified us of his resignation and on October 4, 2024, we placed Mr. Ryan on garden leave, meaning he remained employed by us but was only working for us upon request.
Curt Kole – Former Executive Vice President, Precision Logistics; Executive Vice President, Global Sales and Strategy, PeriShip Global
On April 22, 2022, the Company’s wholly owned Subsidiary PeriShip Global, LLC entered into an Employment Agreement with Mr. Kole with an initial term of two years, which automatically renews for additional one-year terms until either party gives 60-day notice of non-renewal or otherwise terminated the agreement according to its terms. Under the employment agreement, Mr. Kole is entitled to an annual base salary of $230,000. Additionally, pursuant to the employment agreement, on April 22, 2022, Mr. Kole was awarded PSUs with a grant date value equal to his annual base salary, each such unit representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share, subject to the terms of the 2020 Plan. These PSUs, except as otherwise provided in the award agreement, will vest, subject to continuous employment and other conditions, as follows: 50% if the Company’s common stock price exceeds $5.00 per share for a period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share for a period of 20 consecutive days, in each case prior to the three-year anniversary of the grant date. Pursuant to the employment agreement Mr. Kole will receive a commission of 1.5% on eligible annual sales in excess of $30,000,000, increasing to 2.0% on eligible annual sales in excess of $32,000,000. The employment agreement may be terminated by us for cause, by Mr. Kole without good reason, or by delivering a non-renewal notice. If terminated by us without cause or by Mr. Kole with good reason Mr. Kole will be entitled to accrued but unpaid base salary and expenses, a payment equal to 12 months of his then base salary if the Employment Agreement is terminated during the initial two year term or a payment equal to 6 months of his then base salary if the Employment Agreement is terminated after the initial two year term, and six months of benefits. If terminated upon a non-renewal notice, Mr. Kole will be entitled to any accrued and unpaid salary and expenses prior to the effective date of his termination.
On June 4, 2024, we terminated Mr. Kole’s employment effective June 30, 2024 from all positions with the Company and its subsidiaries.
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Short Term Incentive Plan
On March 12, 2024, the Compensation Committee approved a short term incentive cash bonus plan. The plan is available to nearly all of the Company’s employees, including our named executive officers except for Mr. Stedham and Mr. Ryan. Under the plan, Ms. Meyers is eligible to receive a cash bonus up to 15% of her annual base salary as of January 1 each year, Mr. Volk is eligible to receive a cash bonus up to 6% of his annual base salary as of January 1 each year, and during his employment Mr. Kole was eligible to receive a cash bonus equal to 6% of his annual base salary as of January 1 each year, subject to upward adjustment. Under the Plan, 50% of the bonus is based on achieving 100% of an Adjusted EBITDA performance goal to be set annually by the Compensation Committee. Only if the Adjusted EBITDA target is achieved, the remaining 50% of the bonus is based on achieving 100% of a revenue performance goal to be set annually by the Compensation Committee. Under the plan, the bonus amount can be adjusted upward if the revenue performance goal is exceeded in an amount equal to the total target bonus multiplied by the same percentage that revenue exceeds the revenue performance goal, up to a maximum of 150 percent. No amounts were paid under the plan in fiscal year 2024.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the outstanding equity awards for our Named Executive Officers as of December 31, 2024.
| Option Awards | Stock Awards | |||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) (1) |
Equity Plan Awards: Number of Shares, Units Rights That Have Not (#) |
Equity Incentive Plan Awards: Payout Value of Shares, Units or Other Rights That Have Not ($)(1) | |||||||
| Adam Stedham | — | — | — | 9,375 | (4) | 12,750 | ||||||||
| 136,055 | (5) | 185,035 | ||||||||||||
| 550,000 | (7) | 748,000 | ||||||||||||
| Fred G. Volk III | — | — | — | 6,250 | (4) | 8,500 | ||||||||
| 13,334 | (6) | 18,134 | ||||||||||||
| 75,000 | (8) | 102,000 | ||||||||||||
| 62,696 | (9) | 85,267 | ||||||||||||
| Nancy Meyers | — | — | — | 5,625 | (4) | 7,650 | ||||||||
| 120,000 | (10) | 163,200 | ||||||||||||
| 28,125 | (11) | 38,250 | ||||||||||||
| Paul Ryan (2) | — | — | — | — | — | — | — | |||||||
| Curt Kole (3) | — | — | — | — | — | — | — | |||||||
| (1) | The amounts in these columns are calculated by multiplying the number of shares by the closing market price of our Common Stock on December 31, 2024, of $1.36 per share. |
| (2) | Paul Ryan served as our Executive Vice President, Authentication Segment until October 4, 2024. |
| (3) | Curt Kole served as our Executive Vice President of Precision Logistics and as Executive Vice President, Global Sales and Strategy of PeriShip Global until June 4, 2024. |
| (4) | These RSUs, which convert into common stock on a one-for-one basis, were granted on July 1, 2024 pursuant to the Company’s salary reduction program, pursuant to which the number of RSUs was determined by dividing the amount of the grantee’s salary reduction by $1.60. The RSUs will vest on January 1, 2025. |
| (5) | These RSUs, which convert into common stock on a one-for-one basis, were granted on July 19, 2023. The first tranche vested on June 19, 2024, and the remaining two tranches will vest in two equal installments on each of June 19, 2025 and June 19, 2026, subject to the grantees’ continued service through each vesting date except as otherwise provided in the applicable award agreement. |
| (6) | These RSUs, which convert into common stock on a one-for-one basis, were granted on November 2, 2022. The first and second tranches vested on each of November 2, 2023 and November 2, 2024, and the remaining tranche will vest on November 2, 2025, subject to the grantees’ continued service through each vesting date except as otherwise provided in the applicable award agreement. |
| (7) | These PSUs were granted on June 19, 2023 and vest in three tranches, except as otherwise provided in the award notice. Tranche 1 will vest 150,000 shares on or after June 19, 2024 if our common stock trades at or above $2.21 per share for 20 consecutive days prior to June 19, 2027. Tranche 2 will vest 200,000 shares on or after June 19, 2025 if our common stock trades at or above $2.94 per share for 20 consecutive trading days prior to June 19, 2027. Tranche 3 will vest 200,000 shares on June 19, 2027 if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 19, 2027. |
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| (8) | These PSUs were granted on June 30, 2024 and vest in three tranches, except as otherwise provided in the award notice. Tranche 1 will vest 20,000 shares on or after June 18, 2025 if our common stock trades at or above $2.21 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 2 will vest 25,000 shares on or after June 18, 2025 if our common stock trades at or above $2.94 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 3 will vest 30,000 shares on June 18, 2027 if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 18, 2027. |
| (9) | These PSUs were granted on April 22, 2022 and vest in two equal tranches, except as otherwise provided in the award notice. Tranche 1 will vest on the earlier of April 22, 2024, or April 22, 2025 if our common stock during such period is at or above $5.00 for 20 consecutive trading days. Tranche 2 will vest on the earlier of April 22, 2024, or April 22, 2025 if our common stock during such period is at or above $7.00 for 20 consecutive trading days. |
| (10) | These PSUs were granted on July 20, 2023 and vest in three tranches, except as otherwise provided in the award notice. Tranche 1 will vest 35,000 shares on or after June 18, 2024 if our common stock trades at or above $2.21 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 2 will vest 40,000 shares on or after June 18, 2025 if our common stock trades at or above $2.94 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 3 will vest 45,000 shares on June 18, 2027 if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 18, 2027. |
| (11) | These PSUs were granted on February 16, 2022 and vest in two equal tranches, except as otherwise provided in the award notice. Tranche 1 will vest on the earlier of February 16, 2024, or February 16, 2025 if our common stock during such period is at or above $5.00 for 20 consecutive trading days. Tranche 2 will vest on the earlier of February 16, 2024, or February 16, 2025 if our common stock during such period is at or above $7.00 for 20 consecutive trading days. |
Director Compensation
Our directors are eligible to receive options, restricted stock and other equity linked grants under our equity incentive plans. The Compensation Committee of the Board has approved a director compensation policy (“Director Compensation Policy”) to govern the annual compensation payable to directors for their service on our Board. The Compensation Committee has reserved the right to make any necessary, appropriate or desirable changes to the terms of the Policy.
Pursuant to our Director Compensation Policy, as amended, starting in fiscal year ended December 31, 2024, and until such time that our Compensation Committee or Board determines a change in director compensation is necessary, appropriate or desirable, each non-employee director shall receive an annual award of 35,000 RSUs or 35,000 shares of restricted stock under the 2020 Plan (or a successor stockholder-approved plan thereto) on the first business day following the date a quorum of stockholders meets and votes on proposals in an annual meeting of stockholders.
Under our Director Compensation Policy in place during fiscal year 2024 and as of the date hereof, a non-employee director may specify before the date that is 15 days preceding the annual meeting of stockholders of the year prior to the year of grant whether he or she would prefer to receive his or her awards to be granted in the following year to be in the form of RSUs or restricted stock; provided, however, such choice will not be binding on the Compensation Committee. The RSUs or restricted stock granted pursuant to the Director Compensation Policy will vest in full on the earlier of the one-year anniversary of the date of grant subject to the non-employee director’s continued service to the Board through such date, or the death or disability of the non-employee director, and will be payable upon the earlier of the director’s separation from service as a director or, upon an earlier payment date elected by the director, provided that the election is made no later than the date that is 15 days preceding the annual meeting of stockholders of the year prior to the year of grant.
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The following table sets forth information about the compensation earned by or paid to our directors during our fiscal year ended December 31, 2024. Please refer to the “Summary Compensation Table” above for compensation earned by Mr. Stedham as a member of the Board during fiscal year 2024.
| Name | Stock Awards ($)(1) (2) |
Option Awards ($)(2) |
All Other Compensation ($)(3) |
Total Compensation ($) | ||||
| Scott Greenberg | 56,000 | - | - | 56,000 | ||||
| David Edmonds | 56,000 | - | - | 56,000 | ||||
| Marshall Geller | 56,000 | - | - | 56,000 | ||||
| Howard Goldberg | 56,000 | - | - | 56,000 | ||||
| Dr. Arthur Laffer | 56,000 | - | - | 56,000 |
| (1) | Amounts in this column represent the grant date fair value of the awards, calculated in accordance with ASC 718. Each of our directors received restricted stock awards except Mr. Edmonds who received restricted stock units. The assumptions used in calculating the grant date fair value of the awards are set forth in Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements. |
| (2) | The table below sets forth the number of unvested stock awards and the aggregate number of options outstanding held by each of our directors, except for Mr. Stedham, as of December 31, 2024. Please refer to the “Outstanding Equity Awards at Fiscal Year End” table above for the number of unvested stock awards and options outstanding held by Mr. Stedham as of December 31, 2024. |
| Name | Aggregate Number of Unexercised Option Awards Outstanding at December 31, 2024 | Aggregate Number of Unvested Stock Awards Outstanding at December 31, 2024 | ||||||
| David Edmonds | — | 35,000 | ||||||
| Marshall Geller | 23,000 | 65,000 | ||||||
| Howard Goldberg | 25,000 | 35,000 | ||||||
| Scott Greenberg | 10,000 | 121,819 | ||||||
| Arthur Laffer | 23,000 | 35,000 | ||||||
| (3) | Does not include payments or benefits provided under the Company’s 2021 Stock Purchase Plan which are generally available to all salaried employees. |
Policies and Practices Related to the Grant of Certain Equity Awards
We do not grant equity awards in anticipation of the release of material nonpublic information, and we do not time the release of material nonpublic information based on grant dates or for the purpose of affecting the value of executive compensation. In addition, we do not take material nonpublic information into account when determining the timing and terms of grants. We do not currently have a formal policy with respect to the timing of option grants as our current practice is to grant time- and performance-based RSUs to align executive compensation with shareholder return.
During the fiscal ended December 31, 2024, we did not grant any named executive officers option awards in the period beginning four business days before and ending one business day after the filing of a periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that disclosed material nonpublic information.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information as of December 31, 2024
| Plan Category |
Number of securities to be issued upon exercise of outstanding options, |
Weighted average exercise price of outstanding options, |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
| (a) | (b) | (c) | ||||||||||
|
Equity compensation plans approved by security holders |
81,000 (2) | $ | 3.70 | 1,308,491 (3) | ||||||||
|
Equity compensation plans not approved by security holders |
140,000 (4) | 3.50 | - | |||||||||
| Total | 221,000 | 3.57 | 1,308,491 | |||||||||
| (1) | Represents the weighted-average exercise price of outstanding stock options. The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock units under the 2020 Equity Incentive Plan (the “2020 Plan”). |
| (2) | Represents shares of common stock issuable upon exercise of stock options granted under the 2017 Equity Incentive Plan (the “2017 Plan”). |
| (3) | Includes 954,322 shares remaining available for issuance under the 2020 Plan, 354,169 shares remaining available for issuance under the 2021 Plan. |
| (4) | Includes individual grants to employees and consultants for services rendered to the Company which were not made under the Company’s existing equity incentive plans. |
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Security Ownership of Management and Certain Beneficial Owners
The following table sets forth the number of shares of our common stock beneficially owned as of February 27, 2025, by: (i) those persons known by us to be owners of more than 5% of its common stock; (ii) each director; (iii) our named executive officers (as disclosed in the Summary Compensation Table); and (iv) our executive officers and directors as a group. Unless otherwise specified in the notes to this table, the address for each person is: VerifyMe, Inc., 801 International Parkway, Fifth Floor, Lake Mary, Florida 32746. We also have 0.85 share of Series B Convertible Preferred Stock outstanding held by the Estate of Claudio Ballard.
| Beneficial Owner | Amount of Beneficial Ownership of Common Stock (1) | Percent of Beneficially | ||||||
| Named Executive Officers: | ||||||||
| Adam H Stedham (2) | 424,522 | (3) | 3.4 | % | ||||
| Fred G. Volk, III | 56,780 | * | ||||||
| Nancy Meyers | 22,918 | (4) | * | |||||
| Paul Ryan | 353,492 | (5) | 2.9 | % | ||||
| Curt Kole | 62,310 | * | ||||||
| Directors: | ||||||||
| David Edmonds | 84,662 | (6) | * | |||||
| Marshall Geller | 750,563 | (7) | 5.9 | % | ||||
| Howard Goldberg | 343,662 | (8) | 2.8 | % | ||||
| Scott Greenberg | 315,005 | (9) | 2.5 | % | ||||
| Arthur Laffer | 476,818 | (10) | 3.8 | % | ||||
| All directors and executive officers as a group (9 persons) | 2,516,284 | 18.9 | % | |||||
| Greater than 5% Stockholders | ||||||||
| Geller Living Trust, dated July 26, 2002 | 663,563 | (11) | 5.3 | % | ||||
* indicates less than 1%
| (1) | Based on 12,354,772 shares of common stock issued and outstanding as of February 27, 2025. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days whether upon the exercise of options or warrants. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. This table does not include any unvested RSUs or PSUs, stock options or warrants except for those vesting within 60 days. As for the 5% stockholders, we are relying upon reports filed by each 5% stockholder with the SEC. |
| (2) | Mr. Stedham is also a director of the Company. |
| (3) | Includes (i) 28,592 vested RSUs that become payable in shares of common stock upon Mr. Stedham’s separation from service as a director of the Company and (ii) 152,174 shares of common stock underlying a presently exercisable convertible promissory note in the principal amount of $175,000 with conversation price of $1.15 per share. |
| (4) | Includes 48 shares of common stock held by Ms. Meyers’ spouse. |
| (5) | These shares of common stock are held by Trust Codes Limited. Mr. Ryan may be deemed to have beneficial ownership over the securities held by Trust Codes Limited. |
| (6) | Includes 15,217 vested RSUs that become payable in shares of common stock upon Mr. Edmonds’ separation from service as a director of the Company. |
| (7) | Includes (i) 35,000 unvested shares of restricted stock held by Mr. Geller that will vest in full on June 5, 2025, (ii) 370,034 shares of common stock held by the Geller Living Trust, dated July 26, 2002 (the “Geller Trust”), (iii) 68,310 vested RSUs held by the Geller Trust that become payable in shares of common stock upon Mr. Geller’s separation from service as a director of the Company, (iv) 152,174 shares of common stock underlying a presently exercisable convertible promissory note held by the Geller Trust in the principal amount of $175,000 with conversation price of $1.15 per share, (v) 3,000 shares of common stock underlying stock options exercisable at $5.295 per share held by the Geller Trust and (vi) 7,000, 31,104 and 31,941 shares of common stock underlying warrants exercisable at $4.60 per share, $3.215 per share and $4.60 per share, respectively, held by the Geller Trust. |
| 41 |
| (8) | Includes (i) 35,000 unvested shares of restricted stock that will vest in full on June 5, 2025, (ii) 89,310 vested RSUs that become payable in shares of common stock upon Mr. Goldberg’s separation from service as a director of the Company and (iii) 5,000 shares of common stock underlying stock options exercisable at $5.295 per share. |
| (9) | Includes (i) 35,000 unvested shares of restricted stock that will vest in full on June 5, 2025, (ii) 68,310 vested RSUs that become payable in shares of common stock upon Mr. Greenberg’s separation from service as a director of the Company, (iii) 43,478 shares of common stock underlying a presently exercisable convertible promissory note in the principal amount of $50,000 with conversation price of $1.15 per share and (iv) 6,403 and 15,552 shares of common stock underlying warrants exercisable at $4.60 per share, and $3.215 per share, respectively. |
| (10) | Includes (i) 35,000 unvested shares of restricted stock that will vest in full on June 5, 2025, (ii) 89,310 vested RSUs that become payable in shares of common stock upon Mr. Laffer’s separation from service as a director of the Company, (iii) 25,600 and 10,800 shares of common stock underlying warrants exercisable at $4.60 per share, (iv) 31,104 shares of common stock underlying warrants exercisable at $3.215 per share held by Jama Land, LLC, (v) 3,000 shares of common stock underlying stock options exercisable at $4.025 per share, and (vi) 47,925 shares of common stock held by Jama Land, LLC. Dr. Laffer is the managing member of Jama Land, LLC. The amount also includes 43,478 shares of common stock underlying a presently exercisable convertible promissory note held by the 1065 Institute, Inc. in the principal amount of $50,000 with conversation price of $1.15 per share. Mr. Laffer is a director and the Secretary of the 1065 Institute, Inc. and may be deemed to beneficially own the securities held by the 1065 Institute, Inc. |
| (11) | Mr. Geller is a co-trustee, along with his wife, of the Geller Trust and exercises voting and investment power over the shares held by the Geller Trust. This information is derived from the Amendment No. 2 to Schedule 13D filed by Marshall Geller and the Geller Trust on January 30, 2025. The address for Marshall Geller and the Geller Trust is c/o VerifyMe, Inc. 801 International Parkway, Fifth Floor, Lake Mary, FL 32746. |
The table above does not include the following grants:
| • | 60,000 PSUs granted to two members of the Board on April 7, 2022, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan, vesting over a period of two to three years, in two tranches, depending on certain criteria being met, |
| • | 121,994 PSUs granted to two members of management on April 22, 2022, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan, vesting over a period of two to three years, in two tranches, depending on certain criteria being met, |
| • | 56,819 PSUs granted to one member of the Board on March 15, 2023, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan, vesting over a period of two to three years, in two tranches, depending on certain criteria being met, |
| • | 550,000 PSUs granted to our Chief Executive Officer, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on June 19, 2023 and vest over a period of four years, in three tranches, depending on certain criteria being met, |
| • | 195,000 PSUs granted to two members of management, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on July 20, 2023 and vest over a period of four years, in three tranches, depending on certain criteria being met, |
| • | 75,000 PSUs granted to one member of management, which convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on June 30, 2024 and vest over a period of three years, in three tranches, depending on certain criteria being met, and |
| • | 54,312 RSUs granted to four members of management, which convert into common stock on a one-for-one basis, pursuant to the Company’s salary reduction program, which will vest on January 1, 2026. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The following is a summary of transactions since January 1, 2023 to which we have been a party in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at the end of the last two recent fiscal years and in which any of our executive officers, directors, director nominees, or beneficial holders of more than five percent of our capital stock, or relative or spouse of any of the foregoing persons or any relative of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, had or will have a direct or indirect material interest, other than compensation arrangements which are described under the sections entitled “Executive Compensation” and “Director Compensation.”
| 42 |
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 $1,100 thousand of which $475 thousand was purchased by related parties and entities related to related parties including Adam Stedham, the Company’s President and CEO; Scott Greenberg, the Company’s Chairman; Curt Kole, one of our named executive officers; the Geller Trust; and the 1065 Institute, Inc., a non-profit entity to which our director Dr. Arthur Laffer serves as a director and secretary. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February 25, 2024. The notes will mature on August 25, 2026 unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. The largest aggregate amount of principal outstanding on the notes since they were issued was $1,100 thousand. As of April 17, 2024 the amount outstanding on the notes was $1,100 thousand. Between the date the notes were issued and April 17, 2024, the Company has paid a total of $0 and $44 thousand in principal and interest.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Policy on Pre-Approval of Retention of Independent Registered Public Accounting Firm
The Audit Committee pre-approves all audit and permissible non-audit services on a case-by-case basis. In its review of non-audit services, the Audit Committee considers whether the engagement could compromise the independence of our independent registered public accounting firm, and whether the reasons of efficiency or convenience is in our best interest to engage our independent registered public accounting firm to perform the services. All of the services provided, and fees charged by MaloneBailey were approved by our Audit Committee.
Independence Analysis by Audit Committee
The Audit Committee considered whether the provision of the services described above was compatible with maintaining the independence of MaloneBailey and determined that the provision of these services was compatible with the firm’s independence.
| 43 |
Fees for Professional Services Provided by MaloneBailey, LLP
The following table shows fees for professional services provided by MaloneBailey during the fiscal year ended December 31, 2024, which we refer to as fiscal year 2024 and the fiscal year ended December 31, 2023, which we refer to as fiscal year 2023.
| Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| Audit Fees (1) | $ | 263,165 | $ | 243,756 | ||||
| Audit-Related Fees (2) | - | - | ||||||
| Tax Fees (3) | 24,546 | 15,450 | ||||||
| All Other Fees (4) | - | 3,700 | ||||||
| Total | $ | 287,711 | $ | 262,906 | ||||
| (1) | Audit fees relate to services rendered for the audits of our annual financial statements, for the review of our quarterly financial statements, and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. |
| (2) | Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reporter under “Audit Fees.” |
| (3) | Tax fees relate to services performed in connection with the Company’s annual tax return. |
| (4) | All other fees relate to services rendered in connection with our registration statement filings with the SEC. |
| 44 |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
| 45 |
| 46 |
| 47 |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File |
* Filed herewith
** Furnished herewith
# Denotes management compensation plan or contract
ITEM 16. FORM 10-K SUMMARY
None.
| 48 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. | |||
| By: | /s/ Adam Stedham | ||
|
Adam Stedham Chief Executive Officer and President |
|||
| Date: March 12, 2025 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Adam Stedham | Chief Executive Officer, President and Director | March 12, 2025 | ||
| Adam Stedham | (Principal Executive Officer) | |||
| /s/ Nancy Meyers | Executive Vice President and Chief Financial Officer | March 12, 2025 | ||
| Nancy Meyers | (Principal Financial Officer and | |||
| Principal Accounting Officer) | ||||
| /s/ Scott Greenberg | Director and Chairman | March 12, 2025 | ||
| Scott Greenberg | ||||
| /s/ Marshall Geller | Director | March 12, 2025 | ||
| Marshall Geller | ||||
| /s/Howard Goldberg | Director | March 12, 2025 | ||
| Howard Goldberg | ||||
| /s/ Arthur Laffer | Director | March 12, 2025 | ||
| Arthur Laffer | ||||
| /s/ David Edmonds | Director | March 12, 2025 | ||
| David Edmonds |
| 49 |
INDEX TO
FINANCIAL STATEMENTS
CONTENTS
| 50 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
VerifyMe, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of VerifyMe, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
www.malonebailey.com
We have served as the Company's auditor since 2018
March 12, 2025
| F-1 |
VerifyMe, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents including restricted cash | $ | $ | ||||||
| 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 | ||||||||
| Contingent liability-current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Contingent liability, non-current | $ | $ | ||||||
| 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 December 31, 2024 and December 31, 2023, respectively | ||||||||
| Series B Convertible Preferred Stock, $ par value; shares authorized; shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively | ||||||||
| Common stock, $ par value; shares authorized; and shares issued, and shares outstanding as of December 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Treasury stock as cost; and shares at December 31, 2024 and December 31, 2023, respectively | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
VerifyMe, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
| Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| 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) | ||||||||
| Goodwill and Intangible asset impairment | ||||||||
| Total Operating expenses | ||||||||
| LOSS BEFORE OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expenses, net | ( | ) | ( | ) | ||||
| Change in fair value of contingent consideration | ||||||||
| Loss on equity investment | ( | ) | ||||||
| Loss on sale of business | ( | ) | ||||||
| Other expense, net | ( | ) | ( | ) | ||||
| TOTAL OTHER INCOME (EXPENSE), 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 consolidated financial statements.
| F-3 |
VerifyMe, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
| Year Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| 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 consolidated financial statements.
| F-4 |
VerifyMe, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| Years Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Allowance for bad debt | ||||||||
| Stock based compensation | ||||||||
| Loss on equity investment | ||||||||
| Loss on sale of business | ||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||
| Fair value of restricted stock awards and restricted stock units issued in exchange for services | ||||||||
| Loss on disposal of equipment | ||||||||
| Impairments | ||||||||
| Amortization and depreciation | ||||||||
| Unrealized gain 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 provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of patents | ( | ) | ( | ) | ||||
| Leasehold improvements | ( | ) | ||||||
| Purchase of office equipment | ( | ) | ( | ) | ||||
| Cash paid in business combination | ( | ) | ||||||
| Deferred implementation costs | ( | ) | ||||||
| Capitalized software costs | ( | ) | ( | ) | ||||
| Cash from sale of business assumed by the buyer | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit | ||||||||
| Proceeds from convertible debt | ||||||||
| Proceeds from SPP Plan | ||||||||
| Contingent consideration payments | ( | ) | ||||||
| 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 (used in) provided by financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ||||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH - END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Change in fair value of interest rate, swap | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
VerifyMe, Inc.
Consolidated Statements of Stockholders' Equity
(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, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Stock Purchase Plan | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Acquisition | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Treasury stock retired | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Cancellation of Common stock | - | - | ( | ) | - | |||||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| 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 December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statement
| F-6 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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 Nevada on November 10, 1999. VerifyMe, is based in Lake Mary, Florida and its common stock, par value $ per share, and certain warrants to purchase common stock are traded on The Nasdaq Capital Market (“Nasdaq”) under the trading symbols “VRME” and “VRMEW,” respectively.
The Company is a specialized 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 year ended December 31, 2023, 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 consolidated financial statements include the accounts of VerifyMe and its wholly owned subsidiaries PeriShip Global and Trust Codes Global Limited (“Trust Codes Global”). Trust Codes Global was divested on December 8, 2024. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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.
| F-7 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively with early adoption permitted. The Company adopted the new standard beginning January 1, 2024. Note 15 – Segment Reporting has been updated to reflect the new disclosure requirements and certain amounts have been reclassified in the Consolidated Statement of Operations. There is no other impact of adoption of this standard on the Company’s consolidated financial statements and disclosures.
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.
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.
| F-8 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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 derivative liabilities. 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 December 31, 2024 and December 31, 2023.
Amounts in Thousands ('000)
|
| ||||||||
| Derivative Asset (Liability) | Contingent Consideration | |||||||
| (Level 2) | (Level 3) | |||||||
| Balance as of December 31, 2023 | ( | ) | ||||||
| Change in fair value of contingent consideration | ||||||||
| Payments | ||||||||
| Foreign currency adjustment | ||||||||
| Change in fair value to interest rate, SWAP, recognized in other comprehensive loss | ||||||||
| Balance at December 31, 2024 | $ | $ | ||||||
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 15 Segment Reporting, for further discussion of the Company’s segment reporting structure.
| F-9 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Business Combinations
The Company applies the provisions of ASC Topic 805, Business Combinations, in the accounting for business acquisitions. ASC Topic 805 requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets acquired and liabilities assumed at the acquisition date, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets where applicable. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on information obtained from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.
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 year ended December 31, 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 years presented. For the year ended December 31, 2024, 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.
| F-10 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statements of cash flows (dollars in thousands):
| As of | ||||||||
| December 31, 2024 | December 31,2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents including restricted cash | $ | $ | ||||||
The Company classifies cash and cash equivalents
that are restricted from operating use for the next twelve months as restricted cash.
Concentration of Credit Risk Involving Cash and Cash Equivalents
The Company’s cash and cash equivalents
are held at various financial institutions. At times, the Company’s deposits may exceed Federal Deposit Insurance Corporation (FDIC)
coverage limits which are currently set at $
Accounts Receivable
Trade accounts receivable are periodically evaluated
for collectability based on past credit history with customers and their current financial condition. Bad debts expense or write offs
of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic
conditions. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability
to make payments, such allowances may be required. The Company recognized $
Equity Investments
When the Company does not have a controlling financial interest in an entity but can exert influence over the entity’s operations and financial policies, the investment is accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under applicable generally accepted accounting policies. The Company has elected the fair value option for its equity security under prepaid expenses and other current assets on the Consolidated Balance Sheets, as it has determined the fair value best reflects the economic performance of the equity investment. Changes in unrecognized gain or loss of the fair value of the equity investments are included in Other income (expense) on the accompanying Consolidated Statements of Operations.
Inventory
Inventory principally consists of canisters and
pigments and is stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value of the assets. During the year ended December 31, 2023, the Company impaired $
Equipment for Lease
Equipment for lease principally consists of costs
associated with the development, certification and production of the VerifyChecker™ and the VerifyAuthenticatorTM Smartphone
Authenticator technology. These technologies are leased to customers typically for a period of one year in length with
| F-11 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Capitalized Software
Costs incurred in connection with the development of software related to our proprietary proactive end-to-end logistics management products are accounted for in accordance with ASC Topic 350 “Hosting Arrangements and Internally Used Software.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins once the product is available to the market. Capitalized software development costs are amortized over the estimated life of the related product, generally six years, using the straight-line method. The Company will evaluate its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable.
Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets in accordance with ASC Topic 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.
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.
Derivative Instruments
The Company evaluates its equity investments, long-term derivative liabilities, preferred stock, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC Topic 480, Distinguish by Liabilities from Equity and ASC Topic 815, Derivatives and Hedging. The result of this accounting treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as an asset or liability. The change in fair value is recorded in the Consolidated Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
| F-12 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The classification of derivative instruments, including whether such instruments should be recorded as assets, liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified as assets or liabilities at the fair value of the instrument on the reclassification date. Derivative instrument as assets or liabilities will be classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.
Foreign Currency Translation
The functional currency of our New Zealand operations
is the local currency, New Zealand dollar (NZD). The translation of the foreign currency into U. S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted average
exchange rates prevailing during the year. The unrealized gains and losses resulting from such translation are included as a component
of comprehensive income. Translation gains and losses arising from currency exchange rate fluctuations on transactions denominated in
a currency other than the local functional currency are included in “General and administrative” on our Consolidated Statements
of Operations. The unrealized foreign currency transaction gain/losses for the years ended December 31, 2024 and December 31, 2023, were
$
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. For more detailed information about reportable segments, see Note 15 – Segment reporting.
| · | 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.
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.
| F-13 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Authentication
Our Authentication segment primarily consists of our brand protection service line which consists of a custom suite of products that offer clients traceability and brand solutions. Terms typically range between 30 and 90 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. Warranties and other variable considerations are analyzed by the Company, in terms of historical warranties, current economic trends, and changes in customer demand, and have been determined to be insignificant in the twelve months ended December 31, 2024.
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 10 – 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.
| F-14 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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.
Advertising Costs
Advertising costs are expensed as incurred. Advertising
costs were $
Research and Development Costs
In accordance with ASC Topic 730, research and
development costs are expensed when incurred. Research and development costs for the years ended December 31, 2024, and 2023 were $
Income Taxes
The Company follows ASC Topic 740, “Income Taxes,” when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2005 remain subject to examination by major tax jurisdictions due the carryforward of unutilized NOLs.
NOTE 2 – EQUITY INVESTMENTS
In December 2021, the Company acquired shares
of
| F-15 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 3 – REVENUE
Revenue by Category
The following series of tables present our revenue disaggregated by various categories (dollars in thousands).
| Authentication | Precision Logistics | Consolidated | ||||||||||||||||||||||
| Revenue | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| 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 year ended December 31, 2024, 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 December 31, 2024, we did not have any capitalized sales commissions.
For all periods presented, contract liabilities were not significant.
| F-16 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table provides information about contract assets from contracts with customers:
| Contract Asset | ||||||||
| December 31, | ||||||||
| In Thousands | 2024 | 2023 | ||||||
| Beginning balance, January 1 | $ | $ | ||||||
| Contract asset additions | ||||||||
| Reclassification to accounts receivable, billed to customers | ( | ) | ( | ) | ||||
| Ending balance (1) | $ | $ | ||||||
______________
| (1) |
| F-17 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 4 – BUSINESS COMBINATION
Trust Codes Global Limited
On March 1, 2023, we acquired, through Trust Codes
Global, the business and certain assets of Trust Codes Limited (“Trust Codes”), specializing in brand protection, anti-counterfeiting,
and consumer engagement technology with an expertise in the food and agriculture industry. Trust Codes Global uses unique QR codes or
IoT, coupled with GS1 standards to deliver cloud-based brand protection based on a unique per-item digital identity to protect brand and
product authenticity, increase data visualization of a product through the end-to-end supply chain, and creates a data-drive engine to
inform and educate consumers of the product. The Company accounted for the transaction as an acquisition of a business under ASC Topic
805 – Business Combination. The purchase price was approximately $
The following table summarizes the purchase price allocation for the acquisition (dollars in thousands).
| Cash | $ | |||||
| Fair value of contingent consideration | ||||||
| Stock (issuance of 353,492 shares of common stock) (a) | ||||||
| Total purchase price | $ | |||||
| Amortization | ||||||
| Period | ||||||
| Purchase price allocation: | ||||||
| Prepaid expenses | $ | |||||
| Property and Equipment, net | ||||||
| ROU Asset | ||||||
| Developed Technology | ||||||
| Trade Names/Trademarks | ||||||
| Customer Relationships | ||||||
| Goodwill | ||||||
| Accounts payable and other accrued expenses | ( |
) | ||||
| Current lease liability | ( |
) | ||||
| Long term lease liability | ( |
) | ||||
| $ | ||||||
| (a) |
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 $
| F-18 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Contingent Consideration
ASC Topic 805 requires that contingent consideration to be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities using an appropriate valuation methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure of the contingent consideration arrangement. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable; however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, our results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates and changes in the timing and amount of revenue and/or earnings projections.
The Company divested the Trust Codes business
on December 8, 2024. As of December 31, 2024, we had
| F-19 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 5 – 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, 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. On
September 24, 2024, Paul Ryan, Executive Vice President, Authentication Segment, notified us of his resignation. During the third quarter
of fiscal year ended December 31, 2024, we identified concerns relating to the commercial viability of the Authentication segment. As
a result, the Company made revisions to our internal forecasts and concluded that in accordance with ASC Topic 350 a triggering event
occurred indicating that potential impairment exists, which required the Company to conduct an interim test of the fair value of the goodwill
for the Authentication segment. We performed a quantitative goodwill impairment test and determined the fair value of our reporting units
using a combination of an equity approach and a market approach, employing a guideline public company approach. The results of our goodwill
impairment test indicated that the carrying value of the Authentication reporting unit exceeded its estimated fair value. As a result,
the Company recorded a goodwill impairment charge of $
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 year ended December 31, 2024, were as follows (in thousands):
| Authentication | Precision Logistics | Total | ||||||||||
| Net book value at | ||||||||||||
| January 1, 2024 | $ | $ | $ | |||||||||
| 2024 Activity | ||||||||||||
| Goodwill impairment charge | ( | ) | ( | ) | ||||||||
| Foreign currency translation | ( | ) | ( | ) | ||||||||
| Net book value at | ||||||||||||
| December 31, 2024 | $ | $ | $ | |||||||||
| F-20 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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.
The revisions to our internal forecasts resulted
in an interim triggering event for the three months ended September 30, 2024, indicating the carrying value of our long-lived assets
including patents and trademarks, customer relationships, and developed technology may not be recoverable. Accordingly, the Company performed
an interim impairment test and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the
carrying value to the net undiscounted cashflow expected to be generated. The analysis indicated that certain intangible assets were impaired.
The Company further concluded as of September 30, 2024 the carrying value exceeded its estimated fair value, which resulted in an impairment
charge. The Company recorded an intangible impairment charge of $
| F-21 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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):
| December 31, 2024 | 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, 2023 | ||||||||||||||||
| Patents and Trademarks | $ | $ | ( |
) | $ | |||||||||||
| Capitalized Software | ( |
) | ||||||||||||||
| 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 December 31, 2024, our current patent and trademark portfolios consist of nine granted U.S. patents and two granted European patents, two pending foreign patent applications and several foreign trademarks. The Company abandoned one patents during the year ended December 31, 2024.
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 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
As of December 31, 2024, our intangible assets
with definite lives had a weighted average remaining useful life of
| F-22 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 6 – INCOME TAXES
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2024, and 2023 is as follows (in thousands):
| Year Ended December 31, | ||||||||
| US | 2024 | 2023 | ||||||
| Loss before income taxes | ||||||||
| Domestic | $ | ( |
) | $ | ( |
) | ||
| Foreign | ( |
|||||||
| Total loss before income taxes | ( |
) | ( |
) | ||||
| Taxes under statutory US tax rates | ( |
) | ( |
) | ||||
| Increase (decrease) in taxes resulting from: | ||||||||
| Foreign taxes and rate differential | ( |
|||||||
| Increase (decrease) in valuation allowance | ||||||||
| Change in State tax rate | ( |
) | ||||||
| Prior period true up | ||||||||
| State taxes | ( |
) | ( |
) | ||||
| Income tax expense | $ | $ | ||||||
The increase in the valuation allowance during the years ended December 31, 2024 and December 31, 2023 was due primarily to the increase in our net operating losses which may not be utilized in the future.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities consist of the following (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| US | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| Restricted stock (RSAs, RSUs) | ||||||||
| Stock options | ||||||||
| Stock Purchase Plan (SPP) | ||||||||
| Depreciation | ( |
) | ( |
) | ||||
| Intangibles | ( |
|||||||
| Acquisition transaction costs | ||||||||
| Capitalized research and development | ( |
) | ( |
|||||
| Unrealized gain on investment | ||||||||
| Bad debt | ||||||||
| Capital loss carryforward | ||||||||
| Accruals & other | ||||||||
| Impairments | ||||||||
| Gross deferred tax assets | $ | $ | ||||||
| Less valuation allowance | ( |
) | ( |
) | ||||
| Total deferred tax assets | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Total deferred tax liabilities | ||||||||
| Net deferred tax assets / (liabilities) | $ | $ | ||||||
| F-23 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon these factors, Management has placed a full valuation allowance against all deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability.
As of December 31, 2024, the Company has net operating
loss carryforwards of $
The Company completed the IRC Section 382 analysis, in 2022, and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed the IRC Section 382 analysis in 2023 or 2024 and is not aware of any indicators that may impose additional limitations on the use of NOL carryforwards.
Uncertain Tax Positions
As of December 31, 2024, and 2023 we had
The Tax Cuts and Jobs Act of 2017 imposes a mandatory repatriation tax on certain unremitted foreign earnings and provides a 100% deduction to domestic corporations for certain dividends received from foreign corporations after Dec. 31, 2017. The Company divested of its foreign subsidiary on December 8, 2024, therefore, there will be no future dividends from the earnings of our foreign subsidiary to result in U.S. federal income taxes.
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 has evaluated its ability to realize some or
all of the deferred tax assets on its balance sheet and has established a valuation allowance of approximately $
The Company applied the "more-likely-than-not"
recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in
The Company’s practice is to recognize interest
and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the balance
sheets and recognized $
There are
| F-24 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 7—DEBT
PNC Facility
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 November 3, 2023, PeriShip Global entered into a waiver and amendment to loan documents and received a waiver for certain events of default and entered into an amended and restated loan agreement with PNC effective October 31, 2023, which provided amendments to a number of affirmative and restrictive covenants applicable to PeriShip Global and extended the RLOC to September 30, 2024. 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. PeriShip Global was not in compliance with all affirmative and restrictive covenants under the PNC Facility as of December 31, 2024. On February 28, 2025, we received a waiver as of December 31, 2024 for certain events of default.
As of December 31, 2024, our short-term debt outstanding
under the Term Note was $
During the year ended December 31, 2023, $
Effective
October 17, 2022, the Company entered into an interest rate swap agreement, with a notional amount of $
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 $
| F-25 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 8 – CONVERTIBLE PREFERRED STOCK
The Company is authorized to issue Series A Convertible Preferred Stock, par value of $ per share (the “Series A”) and Series B Convertible Preferred Stock, par value of $ per share (the “Series B”). As of December 31, 2024, and 2023, there were shares of Series A outstanding and of a share of Series B outstanding convertible into shares of common stock. Each share of Series A and Series B has limited voting rights, is entitled to participate with the common stock on liquidation and holders of Series A and Series B are subject to beneficial ownership limitations.
NOTE 9 – STOCKHOLDERS’ EQUITY
The Company expensed $
The Company expensed $
On March 31, 2024, the Company issued of
restricted common stock, vesting immediately, with a value of $
On November 4, 2024, the Company issued shares of common stock upon vesting of restricted stock units, net of shares of common stock withheld for taxes.
During the year ended December 31, 2024, the Company issued shares of common stock upon vesting of restricted stock units, and shares of common stock from treasury shares, net of common stock withheld for taxes.
On November 2, 2023 the Company issued shares of common stock upon vesting of restricted stock units, net of shares of common stock withheld for taxes.
On September 20, 2023, the Company issued shares of common stock upon vesting of restricted stock units, net of shares of commons stock withheld for taxes.
On July 31, 2023, the Company issued shares of common stock upon vesting of restricted stock awards, net of shares of common stock withheld for taxes.
On April 22, 2023, shares of common stock were retired to cover taxes on the vesting of restricted stock award.
On March 31, 2023, the Company issued shares of common stock upon vesting of restricted stock units, net of shares of common stock withheld for taxes.
On February 28, 2023, shares of common stock were issued in relation to the acquisition of Trust Codes Global, see Note 4 – Business Combinations, for details.
On December 31, 2023, the Company issued
of restricted common stock, vesting immediately, with a value of $
During the year ended December 31, 2023, the Company retired shares of common stock held in Treasury and shares of common stock outstanding, relating to issuances in prior periods that have been forfeited or cancelled.
During the year ended December 31, 2023, the Company issued shares of common stock issued upon the separation of a former director, relating to 50,002 shares of restricted stock units that had previously vested.
| F-26 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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 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 $
Shares Held in Treasury
As of December 31, 2024, and December 31, 2023,
the Company had and shares, respectively, held in treasury with a value of approximately $
On February 29, 2024, seven participants exercised
their options under the Company’s non-qualified stock purchase plan, and as a result,
On August 31, 2023, six participants exercised
their options under the Company’s 2021 Plan, and as a result,
| F-27 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
On February 28, 2023, fourteen participants exercised
their options under the Company’s 2021 Plan, and as a result,
Shares Repurchase Program
Effective July 1, 2022, 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 $5.00. This plan ended on July 1, 2023.
During the year ended December 31, 2023, the Company repurchased
shares of common stock for $
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.
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 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.
| F-28 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Stock Options
The following table summarizes the activities for the Company’s stock options as of December 31, 2024, and 2023:
| 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, 2022 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Forfeited/Cancelled/Expired | ( |
) | |||||||||||||||
| Balance as of December 31, 2023 | |||||||||||||||||
| Exercisable as of December 31, 2023 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Forfeited/Cancelled/Expired | ( |
) | |||||||||||||||
| Balance as of December 31, 2024 | |||||||||||||||||
| Exercisable as of December 31, 2024 | $ | $ | |||||||||||||||
| (1) |
As of December 31, 2024, and 2023, the Company had no unvested stock options.
| F-29 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
During the year ended December 31, 2024, and 2023,
the Company expensed $
As of December 31, 2024, and 2023, there was $
Restricted Stock Awards and Restricted Stock Units
The following table summarizes the unvested restricted stock awards as of December 31, 2024 and 2023:
| Weighted - | |||||||||
| Average | |||||||||
| Number of | Grant | ||||||||
| Award Shares | Date Fair Value | ||||||||
| Unvested at December 31, 2022 | |||||||||
| Granted | |||||||||
| Vested | ( |
) | |||||||
| Balance at December 31, 2023 | |||||||||
| Granted | |||||||||
| Vested | ( |
) | |||||||
| Balance at December 31, 2024 | $ |
As of December 31, 2024, and 2023, total unrecognized
share-based compensation cost related to unvested restricted stock awards was $
| F-30 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table summarizes the unvested restricted stock units as of December 31, 2024 and 2023:
| Unvested Restricted Stock Units | |||||||||
| Weighted - | |||||||||
| Average | |||||||||
| Number of | Grant | ||||||||
| Unit Shares | Date Fair Value | ||||||||
| Unvested at December 31, 2022 | |||||||||
| Granted | |||||||||
| Vested | ( |
) | |||||||
| Forfeit/Cancelled | ( |
||||||||
| Unvested at December 31, 2023 | |||||||||
| Granted | |||||||||
| Vested | ( |
) | |||||||
| Forfeited/Cancelled | ( |
) | |||||||
| Balance at December 31, 2024 | $ | $ | |||||||
As of December 31, 2024, and 2023, total unrecognized
share-based compensation cost related to unvested restricted stock units was $
For RSUs 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 RSU’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.
| F-31 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table summarizes the unvested performance restricted stock units as of December 31, 2024 and 2023:
| Unvested Performance Restricted Stock Units | |||||||||
| Weighted - | |||||||||
| Average | |||||||||
| Number of | Grant | ||||||||
| Unit Shares | Date Fair Value | ||||||||
| Unvested at December 31, 2022 | |||||||||
| Granted | |||||||||
| Vested | |||||||||
| Forfeited/Cancelled | ( |
||||||||
| Balance at December 31, 2023 | |||||||||
| Granted | |||||||||
| Vested | |||||||||
| Forfeited/Cancelled | ( |
) | |||||||
| Balance at December 31, 2024 | $ | ||||||||
As of December 31, 2024, and December 31, 2023
total unrecognized share-based compensation cost related to unvested restricted stock units was $
| F-32 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Warrants
The following table summarizes the activities for the Company’s warrants for the year ended December 31, 2024 and 2023:
| Warrants Outstanding (Excluding Pre-Funded Warrants) | ||||||||||||||||
| Number of Warrant Shares |
Weighted- Average Exercise Price |
Weighted - Average Remaining Contractual Term in years) |
Aggregate Intrinsic Value (in thousands)(1) |
|||||||||||||
| Balance at December 31, 2022 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Expired | ( |
) | ||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||
| Granted | ||||||||||||||||
| Expired | ||||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||
| Exercisable at December 31, 2024 | $ | |||||||||||||||
| (1) |
| F-33 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
Basic loss per share (EPS) is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The dilutive common stock equivalent shares consist of preferred stock, stock options, warrants, restricted stock awards and restricted stock units computed under the treasury stock method, using the average market price during the period.
The following table sets forth the computation of basic loss per share (in thousands, except share and per share data):
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: | ||||||||
| Net loss: | $ | ( |
) | $ | ( |
) | ||
| Denominator: | ||||||||
| Weighted average shares of common stock – basic | ||||||||
| Loss per share: | ||||||||
| Basic | $ | ( |
) | $ | ( |
) | ||
| Diluted | $ | ( |
) | $ | ( |
) | ||
| F-34 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table represents the weighted average number of anti-dilutive instruments excluded from the computation of diluted loss per share:
| Years Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Anti-dilutive instruments excluded from computation of diluted net loss per share: | ||||||||
| Preferred Stock | ||||||||
| Stock Options | ||||||||
| Warrants | ||||||||
| Stock purchase plan | ||||||||
| Convertible note | ||||||||
| Restricted Stock Units and Restricted Stock Awards | ||||||||
NOTE 12 –EMPLOYEE BENEFIT PLAN
We offer the VRME Retirement Savings Plan (the
“Plan”) to our employees located in the United States of America. Eligible employees can elect to participate in the Plan,
as soon as administratively feasible after enrollment. The Plan permits pre-tax contributions to the Plan by participants pursuant to
Section 401(k) of the Internal Revenue Code (IRC). The Company makes the matching contributions at our discretion. In the years ended
December 31, 2024, and December 31, 2023, the Company contributed a value of approximately $
New Zealand
has a statutory retirement savings scheme, Kiwisaver, in which New Zealand employees may participate. The Company makes the required
by law contributions equal to three percent of each employee’s salary. In the years ended December 31, 2024, and December 31, 2023,
the Company contributed a value of approximately $
NOTE 13 –LEASES
The Company accounts for its leases under 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.
| F-35 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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.
We have operating leases for office facilities. We do not have any finance leases.
Lease expense is included in Management and technology Expenses on the accompanying Consolidated Statements of Operations. The components of lease expense were as follows (in thousands):
| Years ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total lease costs | $ | $ | ||||||
Supplemental information related to leases was as follows (dollars in thousands): | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| 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 | % | % | ||||||
| F-36 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities on our consolidated balance sheets as of December 31, 2024 (in thousands):
| Year ended December 31, | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total future lease payments | ||||
| Less: imputed interest | ( |
) | ||
| Present value of future lease payments | ||||
| Less: current portion of lease liabilities | ( |
) | ||
| Long-term lease liabilities | $ | |||
NOTE 14 – CONCENTRATIONS
During the year ended December 31, 2024, one customer
represented
As of December 31, 2024, two customers made up
During the year ended December 31, 2024, and December
31, 2023, one vendor accounted for
NOTE 15 – SEGMENT REPORTING
As of December 31, 2024, 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. 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 solutions that connect brands with consumers through their products. Consumers can authenticate products with their smart phone prior to usage, and brand owners have the ability to gather business intelligence while engaging directly with their consumers. Our Authentication segment also provides brand protection and supply chain functions such as counterfeit prevention.
We do not allocate the following items to the segments: general & administrative expenses, research and development and other income (expense).
| F-37 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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):
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| Precision Logistics | $ | $ | ||||||
| Authentication | ||||||||
| Total Revenue | $ | $ | ||||||
| Gross Profit: | ||||||||
| Precision Logistics | $ | $ | ||||||
| Authentication | ||||||||
| Total Gross Profit | ||||||||
| Segment Management and Technology - Precision Logistics | ||||||||
| Segment Management and Technology - Authentication | ||||||||
| Sales and marketing - Precision Logistics | ||||||||
| Sales and marketing - Authentication | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Goodwill and Intangible asset impairment | ||||||||
| LOSS BEFORE OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
Additional information relating to our business segments is as follows (in thousands):
Identifiable assets:
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Precision Logistics | $ | $ | ||||||
| Authentication | ||||||||
| Total Assets | $ | $ | ||||||
| F-38 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
NOTE 16 – SUBSEQUENT EVENTS
On February 28, 2025, we received a waiver as of December 31, 2024, for certain events of default of restrictive covenants under the PNC Facility.
On January 1, 2025, the Company granted restricted stock units pursuant to the salary reduction program that will vest on January 1, 2026.
On January 1, 2025, the Company granted restricted stock units that will vest over the next two years.
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 $
On January 13, 2025, we entered into an
Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to
On January 21, 2025, we paid in full all outstanding principal and interest under the Term Note. In connection with the repayment of the Term Note we terminated our interest rate swap agreement with PNC Bank.
F-39